MASTERING YOUR LEASE OR RENTAL
Copyright 2002-2011 Landlord.com
The heart of all landlord/tenant relationships is the lease or rental agreement. If you have a tenant you have such a contract whether you know it or not, but if you cannot refer to a piece of paper on which the terms of the agreement are written you may not be able to demonstrate what the terms of the agreement are. Entering into a rental agreement can be as easy as the prospective tenant asking if he can rent the house for $800 a month, and you saying, "Yeah, sure." But there are lots of other terms to that agreement that you and your new tenant never spoke. They are implied by law, regardless of how you feel about them. Our guess is that you would rather control what is in your agreement. That is why we have this article on line. This article is designed to enable the landlord to understand the various major components of written rental agreements and what they mean. There are some state and local statutes and ordinances that require certain lease terms or render others unenforceable. Such local requirements are beyond the scope of this article, but you can find them either through the resources available on this site, or through your local apartment association. This article can be used as a kind of
checklist if you are preparing a rental agreement on your own. It can also be helpful in understanding the individual clauses of a printed form, and the reasoning behind them. Use it to decide what to cross out, change, or add.
In order to understand how your agreement is set up, you need to know a few basics before we get into the lease language. All terms of a rental agreement, of whatever kind or description, are of two types: express or implied.
EXPRESS: These are the terms that you and your tenant actually discussed, and agreed to. These could include anything, but usually include at least the rental rate, the day of the month it is due, and the extent of the property rented and who will live there.
IMPLIED: These are terms which are in your agreement as a result either of your conduct or the way in which you and the tenant have done business in the past, or which are necessary actually to permit performance of express terms of the agreement, or which your government has deemed fit to mandate by law.
EXAMPLE: Mike orally agrees to rent Ned the cottage in the rear of his property for $450 per month, due in advance on the first of the month. They make no other agreements expressly and leave it at that. The
first month's rent comes due, Ned delivers a check to Mike, and Mike responds "I want cash." What happens?
There was no agreement about the METHOD OF PAYMENT discussed between Mike and Ned, so no express agreement on the species of payment was made. If the custom in the area is that residential rents are paid by check, a court deciding whether to evict Ned would hold that the law implies that payment by check is a term of their agreement due to custom and usage. Even if it does not,
Ned could lie and say that Mike gave permission to pay by check; after all, there is no written agreement to the contrary.
If he wanted to place restrictions on things such as method of payment, or use or occupancy of the premises, or any of the other details which come to mind when thinking of the possible sources of friction between landlord and tenant, Mike should have gotten a written agreement. So should you
TYPE OF TENANCY
Real estate can be rented in two ways. You will either grant a tenancy on a period to period basis, or for a fixed term. A contract defining a tenancy for a fixed period we will refer to as a "lease." A contract defining a tenancy on a period to period basis we will
refer to as a "rental agreement." We will also refer to leases and rental agreements generically as “rental agreements,” but when we do this, the context will make it clear.
EXAMPLE: Landlord Joe and Tenant Moe sign a written agreement for a one bedroom apartment. The agreement reads, in part: "Moe rents from Joe the unit commonly known and referred to as 1234 Nondescript
Lane, Unit A, Anytown, MO, from month to month, with rent due in advance on the first day of each calendar month, commencing March 1, 1999."
This language creates a period to period (or periodic) tenancy which has the potential of going on forever, but may be terminated by either party at any time on appropriate notice. It is a rental agreement.
EXAMPLE: Joe and Moe agree to the following language: "Moe rents from Joe the unit commonly known and referred to as 1234 Nondescript Lane, Unit A, Anytown, MO, for one year commencing March 1, 1999, for a total rent of $12,000.00 payable in
installments of $1000.00 each on the first day of each calendar month, commencing March 1, 1999."
This language creates a fixed term tenancy of one year. At the conclusion of the year, it is over and Joe is free to retake possession and Moe is free to move. But during the one year lease term, neither party can terminate it without the consent of the other short of a breach, unless the lease has a special provision to the contrary.
Leases provide the parties with a stable environment. Both know what to expect for at least the term of the lease. Rental agreements provide the parties with maximum flexibility, in that either can withdraw from the agreement with appropriate notice if something unexpected comes up or the situation turns out to be not to
their liking. Whether to offer or expect one or the other is a matter of sound judgment.
From the landlord's point of view, a fixed term lease in a tight rental market with rising rents and very low vacancy rates may not be a good idea. Because one is committed for a specified substantial period, one must carefully screen the tenant and be sure that all contingencies are foreseen. On the other hand, a fixed
term lease might be used to snare a particularly good tenant, or command a small premium over a month to month deal in a tight market, because the tenant may be willing to pay for that stability.
Regardless of whether you decide on a lease or rental agreement, there are some things that must be in it, others that should, and still others that might be a good idea under specific circumstances. When we speak of "must" and "should" we are speaking in general terms. Some jurisdictions require some
things and prohibit others. We could not write an article of manageable size and include all these. Having read what we have to say, you will need to check for local requirements. We suggest our sections on overviews of state laws and your local apartment association, available through our association links and listings.
PARTIES AND OCCUPANTS
After deciding upon the type of tenancy and method of rent payment, the next term or condition to consider is the identification of the parties and occupants. On the landlord's side it is either the owner, or a person acting upon the owner's behalf. If it is such an agent, the person should clearly be identified as acting on the owner's behalf. On the tenant's side, you must identify each and every person who is going to be liable for performance of all the terms of the lease, and each and every adult person who will be occupying the premises. The number of people responsible for the agreement may or may not equal the number of occupants of the property. For example, you would not request that minors sign the lease, although
you might list their names elsewhere in order to have a record of all persons authorized to occupy the property. It is not only a good idea to include all competent adults who are going to occupy the property as parties to the lease, you must require and insist that everyone sign it too. They become jointly and severally liable for the rent and performance of the other covenants of the agreement, increasing your chances of collection if obligations owed you under the agreement are not paid.
At some point, the rental agreement should include a listing of all individuals permitted to reside in the premises. This is not the same as a restriction on occupancy. The latter simply limits the number of people who may live in the rental unit.
EXAMPLE: no more than two adults and three children may occupy the demised premises.
This device assures the occupancy of the premises will not be surcharged. For example, a family of two adults and two children which produces another child would be in compliance, although they would be in breach if they allowed the wife's adult brother to move in. More control for the landlord, and just as much legitimate flexibility for the tenant, is allowed by having a paragraph, which actually identifies the people
permitted to reside at the premises.
EXAMPLE: The demised premises may be occupied as a residence by the following named individuals, and the following individuals only, and changes or additions to this list may be made only by the written consent of the landlord...
The list would include the names of the persons who are permitted to reside at the rental unit. In contrast to the simple occupancy limitations, the tenants will not be tempted to think they can substitute occupants without the landlord's knowledge or permission, which is a very undesirable state of affairs.
CO-SIGNERS fit under this rule in a special way. They are neither liable for performance of all the lease terms, nor are they tenants. A co-signer guarantees performance by the parties who are liable under
the lease. His liability does not commence until there is a default in the performance of some term of the lease. He should be included under a separate addendum to the lease specifying what he is liable for, but emphasizing that he has no tenancy or possessory interest in the property, and no right to redeem the tenancy in the case of breach (although you may let him do so). Placing the co-signer in the main body of the lease, however, can complicate matters down the road if the issue of whether he
has a right to possession of the property, or to redeem the tenancy, comes up.
IDENTIFICATION OF THE PREMISES
The contract transfers to the tenants a right to occupy and quietly enjoy a piece of real estate. For this reason, it is vital that the extent of that which they are entitled to occupy and quietly to enjoy is specified as clearly as possible. The residential unit is usually no problem. A separate apartment (1, 2, 3, or A, B, C) is usually pretty clear. Disputes can arise, however, with separate storage areas, parking areas and other appurtenances. If this is the case with your unit, be sure to include a description of the appurtenance that goes with the unit.
EXAMPLE (good): "Landlord rents to tenant those premises commonly known as 9876 Big Avenue, Apt. 2, Phillipsville, CA, and parking space #9 only, and storage cubicle A."
EXAMPLE (bad): "Landlord rents to tenant those premises commonly known as 9876 Big Avenue, Apt. 2, Phillipsville, CA, including one half of the garage. Tenant may use the old barn to store some of his stuff."
Providing the parking spaces are actually numbered and the storage area is divided into sections, the first example specifies exactly what the tenant gets. It can be objectively measured, and disputes as to what areas were granted and what were not will be relatively easy to resolve. The second example, while good enough
as to the major living area, leaves open all sorts of possibilities for friction. Does the tenant get the right or left, or front or rear of the garage? How much "stuff" can he store in the old barn, particularly if the landlord or other tenants in the building are storing "stuff" as well? What happens if one tenant claims that the tenant in unit 2 has his "stuff" in the old barn positioned so that his access to his own "stuff" is blocked? These are all things that can be headed off by carefully defining what each tenant gets.
Do not rely on good faith cooperation among the tenants to resolve these things. If you do, keep a good supply of aspirin on hand for the severe headache you will end up with someday and extra money in your pocket to cover the legal expense if you have to resolve the tenants’ problem by eviction one of the tenants.
TERM OF THE AGREEMENT
A definite "must have" is a specification of THE TERM OF THE AGREEMENT. Decide whether the rental will be month to month, week to week, one year, one year with an option for more, etc. Then specify it. Here are examples of phraseology that might be used where the agreement begins on the first of the month.
EXAMPLE 1: The premises are rented from month to month, commencing March 1, 1999.
EXAMPLE 2: The premises are rented for a period of one year, commencing March 1, 1999.
EXAMPLE 3: The premises are rented for a period of six months commencing March 1, 1999, and ending August 30, 1999. In the event tenant holds over thereafter, this lease shall continue in effect as a month to month tenancy, rent payable on the first day of each month in advance, with all other terms
and conditions of this agreement remaining in effect.
The third example converts your lease, like a chameleon, into a month to month tenancy, with terms, such as the rental rate, changeable as circumstances warrant. This type of a device, by the way, is quite popular in situations in which the landlord gives a premium to induce move-in, such as a microwave oven, one month of free rent, etc. It can attract a tenant in a weak rental market, and tie him in for a sufficient time to recoup the cost of the premium.
The next essential term of the agreement is THE RENT itself, together with its manner of payment, late charges, and other factors that pertain to it. The first thing that must be specified is the amount of rent and when it is due and payable.
EXAMPLE: Rent is due and payable in advance, on the first day of each month, in the amount of $600.00.
At this point, the method of payment and location at which it is to be paid can conveniently be included. If, for example, payment only by cash or by money order is desired, then say so. If a payment by automatic deduction from the tenant's checking account is agreed to, specify that. In the absence of specification, any method of payment, including check, which is customarily
used to pay rent, is acceptable, and if it can be changed later, a formal notice of change of terms of tenancy will be required. Specify also the method and location of payment. If there is an office in the complex, specify the drop box. If you want it paid to a specific address by mail, say so. If by mail, be sure to include a statement that the date of the postmark is the date of payment, then keep the envelopes. Date of receipt is impossible to establish and will only lead to the tenant using the lead time created by mail delivery as a "float" or additional grace period.
The worst idea in the world is to give your tenant a bunch of deposit slips and let him make deposits of checks directly to your account. This is a device which is sometimes resorted to by absentee landlords and almost always leads to trouble, particularly when you are initiating eviction proceedings for nonpayment of rent. Nothing will reduce your eviction proceedings to chaos quicker than your tenant making a direct deposit of some partial amount of rent (of which you are not immediately aware) while the eviction is pending. But do not confuse this with direct electronic deduction from the tenant's account. This is an excellent collection device because the landlord remains in control. If the decision is made to remove the tenant, it is necessary only to notify the bank to suspend the direct deductions. Just do not forget to do so.
If there is to be a particular species or method of rent payment, this must be specified in the agreement and this is as good a place as any. If you do not specify a particular method of payment, the tenant is free to pay as he wishes, cash, check, money order, gold, etc. These may not be equally convenient or secure.
This is also the point at which to mention A GRACE PERIOD if there is to be one. Remember what the grace period is designed to do, it is designed to accommodate the inherent delay in transmittal of the payment, and maybe provide a little breathing space once in a while. It is
not a substitute for the due date.
EXAMPLE (bad): Rent is due on the first and late if not received by the fifth day of the month.
EXAMPLE (good): Rent is due on the first day of each month and in default if not paid on that date. Rent received not later than the fifth day of the month may be accepted by landlord as if paid timely.
The difference between the two, though subtle, is significant. The first invites the tenant to believe his rent is due on the fifth of the month. The second makes clear that under specified conditions a late payment will be accepted, but only as a matter of grace.
To avoid confusion arising from grace periods, it is competent to have no grace period at all. If you wish to give your tenant some breathing space to deposit his first of the month paycheck, you can find another way to do it.
EXAMPLE: The rental periods shall run from the first to the last day of each calendar month. The rent for each calendar month is due, in advance, on the fifth day of the calendar month for which the rent is due, without grace period.
Though this seems a small item, the fixing of a definite default date for payment of rent can be critical if it becomes necessary to evict a tenant for a default in the payment of rent.
The LATE CHARGE can be a valuable collection tool and a buffer for losses incurred by the inability of a tenant to get his payment to you on time. At some point your costs of rent collection increase by a late payment. Either you have to make a special bank deposit, or pay a
late charge on your mortgage because you are short of cash to make your own payment, or have to reopen the books for the month to make new postings.
The late charge is designed to compensate the landlord for his expense in accepting a late payment. It must bear some reasonable relationship to the amount it costs the landlord, but it is understood that the true amount for any particular late payment is impossible to determine. If one stops to think about it, it is
really impractical to fix a precise dollar amount on all the costs of reopening the books, making a special deposit, etc.
This implies that the late charge is not a penalty. Never use the word "penalty" in the lease. It is not for the purpose of terrifying the tenant into paying the rent timely. This effect is only incidental. It is designed
Some local jurisdictions strictly limit the late charges, which may be charged. As of this writing, the city of Chicago, for example, limits late charges to $10.00 per month for the first $500.00, plus 5% of each additional $100.00 of the rental installment. In the absence of a local rule such as this, the question of whether a late charge is proper is whether or not it is reasonably calculated to approximate the landlord's damages incurred in a late payment.
EXAMPLE (bad): In a case where the rent on an apartment is $500.00 per month, "rent not received by the fifth day of the month is subject to a $200.00 late charge."
EXAMPLE (good): In a similar case, "rent not received by the fifth day of the month is subject to a $35.00 late charge designed to reimburse landlord for his reasonable expense in processing late payments and any incidental costs arising therefrom."
In the first case, it is clear that the late charge is designed only to terrorize the tenant into paying on time. No one will believe that payment of a $500 rent installment a day late will result in $200 out of pocket expense to the landlord. In the second case, the late charge arguably makes sense. In the absence of a Chicago style late charge ordinance, one which is between 5%
and 10% of the rental installment should be deemed rationally designed to compensate for actual landlord loss. The closer it is to 10%, the more critically it will be scrutinized. The closer it is to 5%, the more likely it will simply be accepted.
If you write a late charge into your contract that is deemed unreasonable, then you will not be able to enforce it. It behooves the landlord to make his late charge fair and reasonable so that it may be enforced. Inclusion of contract terms that are preposterous on their face simply leads to a loss of prestige.
Once you have settled on an amount, be careful of the way in which you draft the late charge provision. There is authority for the proposition that the inclusion of the late charge confers on the tenant right to pay the rent late provided the late charge is also paid. This may not be desirable, as it can lead to habitual
late payment of rent, as the tenant becomes acclimated to paying his contract rent, "plus $35," on the fifteenth of the month, when it is due on the first.
EXAMPLE (bad): Rent shall be paid not later than the first day of each month. Rent paid on or after the fifth of each month is subject to a $35.00 late fee.
EXAMPLE (good): Rent shall be paid not later than the first day of each month and shall be in default if not paid by the second day of each month. In the event payment is accepted on the fifth or later day of the month said payment shall be subject to a
$35.00 late charge. Nothing in this paragraph shall be construed to confer a grace period, or any duty on the part of landlord to accept any payment if in default.
Notice that in the second instance the landlord has reserved to himself the option of accepting the late payment or not. It is clear that the rent is in default, justifying eviction proceedings, if not paid on the first. No right to late payment has been implied.
Some landlords try to use a discount as an inducement to pay the rent on time. A typical provision might read as follows:
EXAMPLE: Rent is $500 per month paid in advance not later than the first day of the month. If paid before the first day of the month, the rent shall be $475.
Any efforts to get the rent in at about the first day of the month aim at a laudable result. It must be kept in mind that they have a down side as well. Usually, so long as there is no rent payment problem, they work just fine. But then, when there is no rent payment problem, there is no need to have such discounts. When a problem does arise, particularly as the need to initiate non-payment of rent proceedings nears, a rental discount of this sort can lead to all kinds of difficulties in calculating the true amount of rent due. Even if all it does is to give your tenant's attorney the opportunity to argue that the discount is really a disguised late charge, the complications that ensue render such a strategy suspect. The best policy is to have the rent due on one certain day (usually the first) with no grace period with a late charge if
BOUNCED CHECK CHARGES are separate from late charges and should be dealt with separately. Many contracts have a fixed charge in the contract. This may not be a good idea, because, unlike a late charge, you
can fix fairly precisely what a bounced check has cost you. Since the late charge (a bounced check will almost always cause the rent to be late), will compensate you for the aggravation and effort in making the check good, try language such as the following.
EXAMPLE: In addition to a late charge Tenant shall compensate landlord for all charges and costs incurred by landlord as a result of tenant's check being dishonored for any reason. Payment of such charges and costs shall be due and owing immediately upon submission of an itemization of such charges and costs to tenant, and failure to pay the same shall be deemed a breach of this agreement.
This clause would enable you to recover all charges reasonably related to the bounced check, and because your recovery constitutes actual damage, there is no need to show a relationship to the underlying rental obligation.
To wrap up the late charge and bounced check charge sections, a couple of cautions are in order. First, keep in mind that these charges are not rent. They are separate charges arising under a the contract and should be accounted for separately. A notice to "Pay $525 or
vacate" may not be valid if $25 of the amount is a late charge. Second, be wary of simply deducting late charges and bounced check charges from rent payments. In most states, the debtor (tenant) who owes you more than one obligation, has the right to direct payment to one or more of them. So if your tenant's check memo line reads "February rent," you should not unilaterally deduct a January late charge from it and deem February's rent partially unpaid.
A SECURITY DEPOSIT is like a hostage held by the landlord to assure that the tenant fulfills all the terms of his agreement, and that if he does not, there will be some fund to which the landlord can resort to make good his resulting losses. In general, the purpose of a deposit is to guarantee performance of the
agreement, restore any damage to the premises over and above normal wear and tear, and to clean the premises at the conclusion of tenancy. This fund is the tenant's money. To the extent it is not used, it must be returned at the end of the tenancy.
Many states have enacted laws controlling the amount of the deposits that can be demanded, how they must be maintained, and the payment of interest on the deposits. You should check the Landlord Law section of our site for your state, and your local apartment association for city and other local jurisdictions that may have enacted ordinances in this regard.
The rental agreement should specify the amount of the deposit, what it may be used for in general, how it is to be replenished if partially consumed, how it is to be refunded at the conclusion of the tenancy, and a caveat that no part of the deposit may be used by the tenant to cure any defaults in payment of rent or other charges arising under the lease unless the landlord agrees to do so in writing in
During the tenancy, the security deposit leads to friction in two major ways. In the first instance, the tenant may view the deposit as a fund to which he can resort if he is short of rent. Thus, you may be confronted with a tenant telling you, "I only have three hundred now, take the rest out of my deposit and I'll
make it up next month." This is never a good idea and is to be resisted at all costs, as it is never made up next month, and if you consent to depletion of the deposit, you will simply be diminishing the fund to which you can resort after the inevitable non-payment eviction.
In the second instance, something arises for which the deposit can be used, the landlord uses it, and is left with nothing. For example, tenant breaks a window, which the landlord replaces for $150, taking it out of a $500 deposit, leaving only $350, which the landlord deems insufficient. A well thought out rental
agreement will place the tenant under an obligation to replenish the security deposit on reasonable notice (say, two weeks), and place the tenant in breach of the agreement if this is not done.
At the conclusion of the tenancy, the landlord generally has a limited time to use the deposit to make repairs and clean the property. The major tenant arguments are two fold, first, that there was no damage to the unit, and, second, that the place was perfectly clean. When the landlord does not properly account for and makes questionable deductions to the deposit, this is the single biggest reason for landlords being dragged into to Small Claims Court by their former tenants.
At the point of move-in, you will have taken a thorough inventory, with the tenant, of the condition of the property at that time. Dilapidations that are not attributable to wear and tear are the tenant's responsibility. But to establish that such dilapidations exist, you will need to make a legible photographic record,
and another complete inventory. Keep track of all receipts for materials and labor.
The rental agreement should specify a time during which any unconsumed portion of the deposit will be returned. California has a good statutory scheme, which gives the landlord three weeks from surrender of possession of the premises to account to the tenant for the deposit at his forwarding address. If your state does
not have specific requirements, you might want to adopt one from a state that has a well thought out scheme, and incorporate it.
UTILITIES, GARBAGE, CABLE SERVICE, ETC., can be source of misunderstanding if not dealt with specifically in the agreement. In the ideal situation, each rental unit will be separately metered for utilities, in which case a clause stating something like "tenant is responsible for all
utilities, except garbage," is quite sufficient.
Sometimes, though, especially in older buildings not initially designed to be divided into multiple units, the utilities are not separately metered and must remain in the landlord's name. In such a situation, the first thing the landlord should do is to inquire both of local and state law and ordinances as to the extent of his powers in this area. In some states, for example, it is unlawful for a landlord to distribute utilities and bill the tenants for them (because the landlord is not a public utility). Some jurisdictions make it altogether unlawful to rent out a housing unit without separate metering.
Assuming that the arrangement the landlord has is legal, however, a decision must be made whether to divide the utilities in some arbitrary way, or to simply absorb the utilities and charge more rent to compensate. If utilities are separately charged but kept in the landlord's name, at minimum full disclosure to the tenants is in order. Whatever arrangement is adopted, it should be carefully and accurately described in the agreement.
The unlucky landlord is occasionally confronted with a tenant who habitually pays his rent late, but always seems to come up with the money before his three day notice to pay or vacate expires. He may park his car in unauthorized places resulting in confusion and inconvenience to other tenants. In any event, such a tenant
can lead to a great deal of annoyance, as well as monetary loss. When this tenant is on a fixed term lease, there is little the landlord can do about it.
For this reason the landlord should consider including the following clause, or a similar one, in any long term lease.
EXAMPLE: In the event the tenant shall commit three or more breaches of this lease in any six month period, then, in that event, landlord may terminate this lease and recover possession of the premises described elsewhere herein upon service upon tenant of a thirty day notice declaring landlord's
election to do so. This remedy shall be deemed to be in addition to any other remedy for breach granted landlord by law or elsewhere in this lease.
Now the landlord has an effective remedy for the recalcitrant tenant.
INVENTORY AND CONDITION
Even when rented unfurnished, most apartments, and many duplexes and free standing houses are rented with major appliances, typically, but not always, built in. These should be listed in the rental agreement and the move-in inventory should specify them to be in good order and repair. While the landlord is obligated to
maintain them during the term of the tenancy, the tenant is obligated to keep them clean and use them for the purposes for which they were intended. The same goes for any additional furnishings you may be including with the lease.
As time passes, whether the rental agreement is a lease or a month to month arrangement, the landlord may become more and more detached from what is going on in the rental unit, and its condition. Occupants may have been substituted or moved out. There may have been circumstances that lead the tenant to think that the
written agreement is superseded by a course of dealing between him and the landlord. In short, the landlord's control over the unit may erode.
A device frequently used in a commercial setting but rarely in a residential one is the ESTOPPEL CERTIFICATE. A provision in the rental agreement permits the landlord occasionally (usually not more than once or twice a year), to submit to the tenant a statement including, but not necessarily limited to, the following: 1. that all the original terms of the rental agreement are still in full force and effect; 2. that the only persons occupying the unit are the original occupants, and if not, who is or is not there; 3. that the rent is $X; 4. that the unit and all landlord provided appliances are in good working order, and, if not, what needs to be fixed. The tenant is given a limited time to respond, usually ten days. From
the time of the tenant's response, any complaints about the unit are limited to what he has included, and any changes to the terms of the rental agreement are limited to what he has recited in response. If he fails to respond, all the items in the Estoppel Certificate are deemed admitted by him.
The Estoppel Certificate is most useful when the landlord is contemplating the tenant's removal. The use of this device can cut off a lot of defenses to eviction, which are manufactured after the notice to vacate is served. The Estoppel Certificate is also useful in cases in which the landlord is contemplating a sale of
the property or a refinance.
MODIFICATIONS TO THE AGREEMENT
Referred to as the "Equal Dignities Rule," a rule of contract construction used to provide that a written contract could be modified only by an agreement in writing. While this is still the law in most jurisdictions, it has been so heavily qualified as to be nearly meaningless. In fact, a written agreement may
be modified by an oral agreement, or even by a course of dealing between the parties, although the burden of showing a written agreement has been so modified is heavy.
This leaves open the possibility that a tenant involved in an eviction proceeding may lie (Omigosh! Really?) and claim that the landlord agreed, say, to accept the rent on the tenth of the month, even if the contract says otherwise. This is usually accompanied by a series of rental receipts showing rent payments between the fifth and the eighth, to show that the
landlord was taking the rent late. Never mind that a series of late payments are usually a precursor to a full blown default, and frequently accompanied by warnings not to be late in the future.
The landlord would be well advised to invest a sentence in his agreement providing THE RENTAL OR LEASE AGREEMENT CAN ONLY BE MODIFIED IN WRITING. While it is still possible to argue that even that clause was modified orally, it makes the burden of the tenant that much heavier, and, if followed during the life of the
lease, almost insurmountable.
MAINTENANCE AND REPAIRS
The manner of bringing MAINTENANCE AND REPAIRS to the attention of the owners, and the consequences of not so doing, deserve a paragraph in your rental agreement. Whether the landlord owns one rental unit or a thousand, reduction of the process of maintenance requests and responses to a routine, memorialized in the rental agreement, pays big dividends in the event of deterioration of the landlord-tenant relationship to the eviction process. Indeed, even if the subject never comes up in a court of law, the responsible landlord has a strong interest in ensuring that small problems are brought to his attention before they cause enough damage to result in large repair bills.
The rental agreement should contain a paragraph that specifies how and where requests for maintenance should be submitted, and under what circumstances the failure to report maintenance requirements constitute a breach of the rental contract. At minimum, a written method of requesting repairs should be set out. Writing
assures that there is a record of each request in the event that the worst happens. Even if the worst does not happen, it disciplines both the tenant and the landlord to deal with maintenance problems in a business like way. By requiring that things such as leaks and obvious structural problems be reported, the landlord can remove the specter of substantial rehabilitation of the rental unit when the tenant vacates.
Ensure your rental agreement includes the following:
1. A location, such as a mailing address, at which maintenance requests and reports can be sent
2. A requirement that maintenance requirements be reported on pain of breach of the agreement
3. A clear warning that oral maintenance requests may not be honored and cannot form the basis for a claim of breach of the implied warranty of habitability
The flip side of this policy requires that the policy be enforced, and that the landlord actually responds to reasonable and important maintenance requests.
ASSIGNMENT AND SUBLETTING are typically prohibited without the landlord's prior written consent. The reasons for this policy are too obvious to require recitation here. The restriction on assignment and subletting reaches back to that portion of the rental agreement that lists the occupants of the premises. The rationale for both clauses is control.
One must recall that mere ability to pay the rent is not the only factor that enters into the decision to rent. Family size, compatibility with existing tenants, proclivities to noise and disturbances, and so on, are also much to be considered. The restriction upon subletting and assignment permits the landlord to
continue to exercise this quality control throughout the life of the rental agreement.
USE OF THE PREMISES
Most well drafted rental agreements include a short paragraph stating that THE PREMISES ARE FOR RESIDENTIAL USE ONLY and may only be used in compliance with law. Sometimes this language is included at the point at which the names of the occupants are listed.
The reason for this language is to ensure that the property fits into a residential setting and to avoid landlord liability for illegal uses. The operation of a business is clearly prohibited, although business activity that is only incidental to residential use would not be. For example, the entertainment of business
clients or the occasional appointment or telephone call would be acceptable, but operating the apartment as an office would not. Any activity that violates statutes and ordinances would constitute a breach of the agreement. This is designed to incorporate the various life style and safety laws, such as those prohibiting automobile dismantling, use or storage of toxic or dangerous chemicals and substances, or even violations of noise ordinances.
Only a very few states award the prevailing party in a civil proceeding what he spends on an attorney. Practically all states leave this issue to the agreement of the parties. There are several different types of clauses that you might choose from or run up against in printed forms.
1. Those which award attorney fees arising out of litigation only.
2. Those which award attorney fees in any dispute arising out of the contract, regardless of litigation.
3. Those which award attorney fees to the landlord only (or to the tenant, but we have never seen one like this).
4. Those which award attorney fees to the prevailing party.
Type one entitles the award of an attorney fee only where litigation is actually filed in a court of law, while type two allows a party to recover in any dispute in which a party elects to consult counsel. Type three is usually included in contracts where the landlord seeks to restrict recovery only if the landlord prevails.
EXAMPLE: In the event action is taken to enforce any term of the lease agreement, landlord, if he prevails, is entitled to an award of his reasonable attorney fees, in addition to all other costs of suit.
Most states have either prohibited and rendered unenforceable the type 3 clause, or made it reciprocal so that "landlord" is read as if it were written "either party." Type 4 clauses accept this reality and make the attorney fee award mutually applicable to the prevailing party.
Although detailed recommendations are beyond the scope of this article, we feel constrained to put in a few thoughts about attorney fee clauses at this point. As a practical matter, the attorney fee clause is only operative at the time the tenant is being evicted. The tenant is being evicted, in 90% of cases, because he
failed to pay his rent. If he has failed to pay his rent, it is because he is broke. If he is broke, he does not have the money to pay the landlord's attorney fee, so the chances of actual collection of attorney fees are very slim. On the other hand, court procedures being what they are, it is not unusual for a landlord to have to abandon his eviction proceeding and start over. When he does, the tenant is the prevailing party, and the landlord being solvent, collection by the tenant’s attorney of his
attorney fee is a certainty.
TIME OF THE ESSENCE
You may find in your printed form, and frequently in specially prepared ones, good ones, anyway, a clause that goes something like this: "TIME IS OF THE ESSENCE IN THE PERFORMANCE OF THE TERMS OF THIS AGREEMENT." This is not a throw away. At law, in most states, a failure to timely perform a term of the agreement is not necessarily fatal. That is, if you show up a day late, this would only constitute a total breach of the agreement if the aggrieved party could show that he suffered substantial damage as a result. In
most cases this is very difficult to do. With the quoted language in the agreement, timely performance of every term of the agreement is absolutely required and will be enforced by the courts. Needless to say, this applies as much to the landlord's obligations as the tenant's.
The NON-WAIVER CLAUSE is there to counteract, in part, the operation of law which states that conduct inconsistent with the assertion of a right, waives the right. While it is equally possible to waive a non-waiver clause as well as any other, its inclusion at least gives the landlord the flexibility to ignore minor
breaches of the lease, acting only on those which really matter.
Your lease should have a specification of WHERE AND HOW NOTICES AND PAPERS MAY BE DELIVERED (SERVED ON) THE PARTIES. Most state laws control how this can be done, but it is usually competent for the parties to specify by contract alternative methods, so long as they satisfy due process.
This clause is primarily for the benefit of the landlord, permitting him to specify the place where papers can be delivered to him. The idea is to limit the number of places you need to look to see if someone has sent you something important.
A lease is an encumbrance. RECORDATION OF THE LEASE can cloud the title and make it more difficult to obtain financing, or to sell the property. A clause making it a total breach of the lease to record the lease in the chain of title is designed to alleviate this problem by
permitting the landlord to terminate the lease and evict the tenant who records it, thus clearing the title.
Another of those rarely read but important clauses is referred to as the SEVERABILITY CLAUSE. It usually reads something like this: "If any portion of this contract is found to be unlawful, contrary to public policy, or unenforceable, then the remainder hereof shall
continue in full force and effect." This clause is a percentage play, designed to avoid the entire agreement being declared void if only a part of it is. For example, if the landlord specifies that he may serve the tenant with a notice to pay rent or vacate by mailing it to a post office box in Tibet, the court, when the issue comes before it, can declare only that provision void, rather than the whole lease.
The so called INTEGRATION CLAUSE is useful to bring down an iron curtain between the negotiations which may have led up to the lease, and the lease itself. This clause may read as follows.
EXAMPLE: This lease contains the entire agreement between the parties, and no other agreements, oral or in writing, express or implied, pertaining to the tenancy or premises, or anything incidental thereto, exist between the parties hereto as of the date of execution of this agreement.
An integrated agreement is one which is intended to deal with all elements of the subject matter of the contract as of the date of the agreement, and to abrogate any and all informal understandings the parties may have had before that. This is useful to cut off later claims that there were all sorts of promises to replace carpets, install spas, etc., a year down the road. That a contract is an integration of all the agreements between the parties is a question of fact which must be decided by a trier of fact (if it ever comes to that, and it sometimes does), but the inclusion of an integration clause makes such a finding much easier.
HOUSE RULES are most often used in cases of medium to large complexes rather than single family dwellings, although there is no conceptual reason for this. In fact, when renting a condominium or town home or a house in a restricted development the
inclusion by reference of the association rules as house rules is essential. House rules deal with matters which are incidental to the tenancy itself, and which are generally recognized to be subject to change. They will typically deal with the use of common areas such as swimming pools, laundry facilities, playgrounds, assignment of parking spaces, etc. House rules generally contain a provision stating they may be revised on specified written notice. This is useful, since if they are included in the lease itself, they would be immutable for the entire term of the lease except by mutual consent, which cannot always be relied upon. On the other hand, it is a good idea to have a clause in the lease, stating that a substantial breach of the house rules is a breach of the lease.
House rules may be in an addendum, but not all addenda are house rules. Addenda are attachments to the lease agreement, usually a printed form, but sometimes a specially prepared lease, where something comes up at the last minute and it is not economical to retype the whole thing. It is in an addendum where you might
include some of the suggested lease provisions that are missing from a printed form. Ensure that all parties get copies, and that the addenda are firmly attached to the main body of the lease. Having all parties sign each page of the addendum is essential.
The written agreement is a memorial of all the agreements you have with your tenant concerning his tenancy and the premises. This article should have assisted you in understanding some of the things which are included in printed forms available in stationery stores, and even in that lease you had drafted for you six years ago by your attorney. If you find the agreement you have does not fully satisfy you, do not hesitate to make changes to fit circumstances. There is no magic to drafting a lease, except to make it clear, and no secret words to use which will salvage an inappropriate or unintelligible writing.
A lease drawn to your specifications should be available from a local attorney who will incorporate your needs and give cautions and recommendations based on state and local regulations and laws. It should cost you well under $500. While this may seem like a lot, it is cheap when you realize it can be used and re-used for
years. But printed forms will work too, so long as you have the experience to foresee what might go wrong, and supplement the printed language with that in mind, and in light of what might be required by local laws and regulations.