Lease Agreement Add Ons for Rental Property

I have been renting property for a couple of years now and finding it quite profitable. I am still not an expert but I have learned a few lessons along the way. Here are some things I would recommend that landlords either verify are already in the lease contract, or adding additional clauses to cover if you are working on a lease agreement with a tenant:

Late Fee - I put an add-on in my lease for a late fee of $5/day starting on the 1st of the month. I wave the late fee if the rent is paid by the 5th. This has worked well for me although my management company told me that they typically do an immediate 5% late fee once its late.
Pets - I have accepted pets, but I explicitly list the description of the pets so there is no mistake about what I ok'd. I don't say "dog", I say yellow lab named "Soko" weighing ~50lbs. I usually advertise the property with a non-refunded pet fee, but so far its always been negotiated out. Better the one-time pet fee than a monthly reduction in rent IMO.
Lockout Fee - I added a clause to the rental agreement that charges a $35 fee if the tenants lock themselves out. Quite frankly I think it should be more as these types of things can usually end up being very inconvenient.
Check Bounce Fee - I didn't have this clause in my lease at first, but through experience realized I needed it. I never had a problem with this except one time the tenant called me and told me not to deposit her rent check because it would bounce. I had already deposited it and luckily she was able to get it resolved and the check cleared. However I now have a clause that explicitly states how much I am going to charge if a check bounces and that the late fee applies until the rent has been received with a good check.
Clogged Drains -- The worst offender for my tenants due to the old pipes in an old house. I still don't have anything in the rental agreements, but would love to add something to cover this somehow. I would perhaps consider writing in language that deals with clogged pipes (ie tenants stuffing tons of food down the kitchen sink - [UPDATE:even with a garbage disposal]). Its happened to me and its probably the biggest problem spot for one of my rental properties.

Anyone have other suggestions to add to the basic rental agreement?

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Comments (16)

I always include a clause clarifying the structure of the lease after the initial term in satisfied. For ex., I usually state that after the initial 12 month contract is up, the lease automatically adjusts to rent+5%. This provides incentive for the tenant to formally renew the lease at the prior rental rate, and for the landlord, it prices in the additional vacancy risk and usually secures a 'guaranteed' duration (even if its just an additional 3-6 months).

Posted by atlas | February 20, 2008 9:49 AM

That pipe clause is pretty silly. Put in a garbage disposal. This is 2008, ya know! :)

Posted by Matt | February 20, 2008 11:08 AM

Smoking inside the property would be a big one for me. Once the property is rented to a smoker the value decreases tremendously. Also you should include a clause about an immediate evection for a drug related arrest or service of a search warrant. If you allow them to stay then you give up the safe harbor provision of federal law and can forfeit your property by civil asset forfieiture.

Posted by ParatrooperJJ | February 20, 2008 12:16 PM

My timeline and experience in becoming a landlord has been really similar to yours.

One thing I did not add in the lease but provided in a welcome letter was a general maintenance checklist. I mentioned the frequency with which the air filter should be changed as well as what types of cleaning supplies should be used on different surfaces. The air filter thing has been a real issue. I rented my first property to friends, so I'm over there regularly for dinner and socializing. I can only nag so many times about them not changing the filter- seems like such an easy thing when you consider the cost of replacing the HVAC!

I would like your opinion though on a different topic: I'm moving in about 4 months and will convert my current home to rental property. I'm curious how you determine your break even point (read your entries, by the way). What I mean is, are you just looking at the interest on your mortgage as a monthly expense, or do you include the principal as well and therefore the whole mortgage amount? It seems like only the interest should be considered when I try to reach my break even point. At my other 2 properties this wasn't an issue when determining rent, but my current home will rent for a good bit more and I'm having a hard time pricing it.

Posted by Jon | February 20, 2008 1:51 PM

i rent a condo, and my landlord explicitly states in the lease that she is responsible for all repairs excluding minor plumbing issues. What those issues can include (but are not limited to) is included as well. Thus, I have a trap in the sink :)

Posted by brittany | February 20, 2008 4:16 PM

Yo Matt - always had a garbage disposal. However sometimes tenants aren't the smartest and the just stuff the stuff down there. I just got a $200 plumber bill from the last incident.

Posted by 2million | February 20, 2008 7:25 PM

I'd be concerned with the clogged drain clause. I'd think this would be one of those things that are considered wear and tear and part of the owner's responsibility for upkeep. But maybe a clause for things that are abused but that would still be hard to prove unless it was consistent and documented issue.

Posted by Nelson | February 20, 2008 7:45 PM

A generic term that tenant is responsible for all the wear and tear maintenance below a certain amount e.g. $200.

If your rental property is furnished with air condition units, you might want to consider to include a term to ensure the tenant have a regular service of the units, says, every 3 months.

Posted by Wai Ling | February 20, 2008 9:47 PM

Sometimes with Clogged Drains Ect. you have to check with each states renter rights. Here where i live you if you a landlord and there are issues with any of the water pipes or plumbing no matter how small it is I am responsible. So check with your State Laws. Also here we can not say we wont rent to smokers. And here if a flipping druggie rents your house and gets cought selling out of it the state takes it..SO I always do a Total Background Check and do not ever just rely on the people they last rented from i pay that extra 20 dollars and do them online.

Posted by Faith | February 21, 2008 2:17 AM

2mill:

have you ever been to mrlandlord.com?

- s.b.

Posted by some body | February 21, 2008 1:12 PM

I have a couple of rental properties.

I always charge the maximum amount that the market will support. That being said, the amount you charge should certainly include the principal plus interest - the property should be "cash flow positive" - that is what I consider my "break even point" - if I lost my job tomorrow and I had no personal income, I do not want to worry about paying "principal" on my rental properties.

I have clauses in my rental agreement about me having specifically warned (and have a blank for the tenant to initial in) that they need to buy renter's insurance.

I hear that there is a clause out there (but have not found it) that automatically grants the landlord a lien on the tenant's personal property if they don't pay rent.

Re air filters: Unless I have an obsessively neat tenant (I love these!) I try to change them myself when I pick up the rent - this takes time, but it ensures that the tenant doesn't trash the house, I can confirm thatthey haven't moved out, I can confirm the air filter is changed, and I sleep easy at night knowing my $5K HVAC isn't getting clogged.

Posted by flightgirl78 | February 21, 2008 6:05 PM

Assuming we're talking about a house and not a condo, I'd strongly recommend putting in a clause about garden maintenance.

Posted by Master Your Card | February 21, 2008 10:28 PM

Garden maintenance? Now thats one I am interested in. How do you put a clause is about that? Do you have any fees associated with this?

Posted by 2million | February 23, 2008 1:55 AM

So when you write up this contract did you have a lawyer do it or did you type it up yourself?

Posted by Garrett | February 23, 2008 6:11 PM

The plumbing clause is going to be a tough one to enforce. It may be obvious that they've jammed too much food down the drain, but how do you define too much?

Also, this could be seen as penalizing people with long hair...

I'd just deal with the plumbing problems from time to time, and for added preventive maintenance, include an occasional drain-o treatment.

-Grant

Posted by Grant | March 2, 2008 8:04 PM

In Singapore, it is standard rental practice for the first $100 maintenance to be borne by the tenant. Repairs above that will be paid by the owner. Contract carries this clause. Normally the tenant will perform the repair after discussing with the owner, and whatever is on top of the $100 is billed to the owner or reduced from the rent. This provides an incentive for the tenant to take care of the little things that end up costing a lot.
Airconditioning routine maintenance is also tenants responsibility and the tenant has to show quarterly cleaning bills to the owner.

-Hima

Posted by Hima | January 30, 2009 3:22 AM