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Rental/Lease Agreement
A Residential Lease Agreement outlines the terms of a residential tenancy between a landlord and tenant.
Landlords and property managers use these documents every day to lease and maintain rental properties.
Commercial Lease Agreement
A Commercial Lease Agreement creates a commercial tenancy between a landlord and business tenant.
Eviction Notice
Landlord notices are given by a landlord to a tenant. They provide the option to evict a tenant, give the tenant an opportunity to resolve an issue, o...
Rental Application
A Residential Rental Application is used by landlords, lessees, and property managers to collect information on potential renters prior to leasing.
Last updated July 4, 2024
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Renting out property can seem overwhelming when landlords have to create protective documents, follow landlord-tenant laws, and consider tax implications for their rental income.
However, these challenges can be worth overcoming when you consider the financial rewards of renting out property. Having rental income can set you up for success and offer you financial freedom in the future.
In this guide, we'll cover basic landlord-tenant law, landlord responsibilities and limitations, and the pros and cons of hiring a property manager.
Landlord-tenant law outlines the rights and responsibilities of landlords and tenants involved in residential and commercial lease agreements. Besides outlining and governing the actions of landlords and tenants during a tenancy, some aspects of landlord-tenant law also govern the application and screening process.
In the United States, landlord-tenant law is composed mostly of state-specific laws. Each state has its own laws that cover every aspect of the landlord-tenant relationship. Some state laws favour landlords over tenants. However, state laws regarding landlords and tenants cover the same key areas and some states have very similar regulations.
When renting out a property to a tenant, it is very important to familiarize yourself with the laws in the state where your property is located.
In addition to the state-specific laws that regulate the duties and rights of landlords and tenants, there are federal and municipal laws that regulate tenancies and influence the state-specific laws.
Numerous federal laws govern the rights and duties of landlords and tenants, both before and during a tenancy:
The Uniform Residential Landlord and Tenant Act (URLTA) helps the states govern residential tenancies and protect both landlords and tenants. The purpose of the act is to define the rights and obligations of landlords and tenants so they maintain the quality of rental properties.
When both parties maintain a rental property, tenants have a higher quality of living and landlords don't have to make as many repairs. Since states can determine their own landlord-tenant laws, states have adopted different amounts of the rights and duties outlined in this act.
Even when someone is applying to rent a space, they are protected by federal legislation that gives them a fair chance at securing housing. The Fair Housing Act is federal legislation that prohibits housing providers from discriminating against tenants and denying people housing based on:
The Fair Housing Act also applies to real estate companies, municipalities, banks, and insurance companies when people are buying a home, trying to get a mortgage, seeking housing assistance, or buying insurance.
If a landlord discriminates against a tenant or applicant, the wronged party can file a complaint with the Department of Housing and Urban Development.
Often, when a tenant submits a Rental Application to rent a space, the landlord will screen them by conducting a credit check through a credit reporting agency or tenant screening company. The Fair Credit Reporting Act is a law that protects the credit information of consumers when they apply to rent a space. This law dictates that the landlord cannot provide the applicant's credit information to anyone else unless they have a legitimate reason that meets the act's criteria. Additionally, you must securely dispose of a tenant’s credit report and any information you gathered from it.
By learning about landlord-tenant laws, you can ensure you are following the best practices to avoid any legal battles with your tenant.
Besides acquiring a rental property and advertising it, you have ongoing responsibilities that you can't ignore as a landlord. Some of your ongoing obligations are legally mandated, such as keeping your rental property habitable and complying with housing and building codes.
When you manage your rental property yourself, you'll have to meet with applicants, show them the space, screen them for potential liabilities, and select the best tenant. When you screen tenants, you may ask for their:
Typically, you would assess if they have a stable enough income and a high enough credit score to gauge their ability to pay rent. Then, you can determine whether a tenant would make a suitable renter.
Speaking to previous landlords can offer insight into a tenant's rental history. A previous landlord may tell you if the applicant made rental payments on time and if they were respectful. Researching an applicant prior to leasing is a very important step that can save you from issues down the road.
With the nature of renting and moving, you may have to screen tenants more often than you'd like. Additionally, if you own multiple rental properties, you'll have to manage more tenants and find new tenants more often.
Whether you own residential or commercial space, you will have to draft and sign a Lease Agreement every time you select a new tenant or when you renew a lease with new terms. The lease terms will govern you and your tenant's rights and obligations, as long as the terms don't violate any laws or regulations. Many landlords choose reliable, long-term renters that require minimal management. Provide your tenant with a rent receipt every time they pay rent.
Although your tenant occupies the rental unit, it's still your property. You'll have ongoing responsibilities, such as ensuring you have the proper insurance, and obligations to your tenant, such as making repairs in a timely manner.
Generally, it's the landlord's responsibility to maintain the property unless the lease states otherwise and your state's landlord-tenant laws allow you to pass the responsibility to the tenant.
In general, you must make sure your rental properties are clean, safe, and sanitary for tenants. State housing codes require you to ensure that your rental properties meet a minimum standard, so you protect the health and safety of your tenants. These requirements include proper pest control.
Whether it's a house, apartment, or basement suite, your rental space will eventually require repair. Repairs can include broken dishwashers, fridges, toilets, and much more.
Once a tenant has informed you of a problem that needs fixing, you must take care of it within a reasonable time frame. If the problem is affecting their ability to live comfortably in the property, such as a broken-down furnace, leaky shower, or broken window, you must deal with it quickly. Neglecting to complete a repair can result in legal consequences.
There is no set time frame for landlords to respond to repair requests, but often, it depends on the jurisdiction's laws and what repair needs to be made. Some repairs must be prioritized as soon as possible, such as issues to do with heat, plumbing, electricity, fire safety, and mold.
If you own a house and rent out the basement, the house's outdoor maintenance might still be your responsibility. Outdoor maintenance may include shoveling walkways, trimming grass, and removing debris from entranceways. If you're renting out an entire house, you can usually pass the outdoor maintenance responsibilities to your tenant as part of the Lease Agreement.
You should inspect your rental property before a tenant moves in and after they move out. A Rental Inspection Report helps determine what repairs need to be made, who is responsible for the cost of those repairs, and what costs can be deducted from a tenant's security deposit.
In some states, you're required to do a walk-through inspection in order to use a tenant's deposit to cover repair costs. Failing to do so can result in the tenant taking you to court to recover their deposit.
Routine inspections can help you ensure your property is being kept in good condition and everything is in working order. Keep in mind that to do a routine inspection, you need to provide your tenant with a Notice to Enter before you can inspect the property.
Walk-throughs can also help you discover any problems that your tenants may have neglected to mention, like a leaky faucet or a pest problem. Inspections can help you stay on top of your obligations, avoid delays with repairs, and prevent issues from spreading or worsening and thus costing more money.
In other words, inspections can help you avoid potential legal issues by identifying problems before tenants complain about them, and establish a record regarding the state of the property should that information ever be needed in court.
Insuring a home you reside in is different from insuring a property you rent out. As a landlord, you may already have homeowners insurance on your rental. While this may provide some protection, you probably need a landlord insurance policy as well. A landlord insurance policy may be more aligned with your needs and offer coverage for damage caused by the tenant.
Remaining organized as a landlord is imperative. Once you become a landlord, you need to separate your personal finances from your business finances and develop a filing system, such as a spreadsheet, to manage your cash flow. A filing system will allow you to keep a close eye on your income and also plan for any future expenses, such as renovations, repairs, property taxes, and insurance.
Tracking your income and expenses allows you to see how much it's generating. Keep a savings fund for emergencies or to account for unexpected expenses, such as having a vacant property for a couple of months.
Organizing your small business finances will pay off when filing your annual tax return because you will have already kept a detailed breakdown of all your expenses and income throughout the year to report to the government.
When you rent out a property, you need to be aware of how it affects your taxes. Your tenant's rental payments are considered your rental income. Because rental income is taxable, you must report it on your taxes.
However, because there are certain costs you may incur while maintaining your rental property, you can deduct these as expenses when you file your taxes. Deducting expenses will lower the amount of money you owe to the Internal Revenue Service (IRS) at the end of each tax year. The IRS sets the rules for what landlords can deduct as an expense.
Depending on your circumstances, you may be able to deduct the following items as expenses:
Keep in mind that any money you spend to renovate and improve a rental property is not a permissible deduction. The maintenance expenses that you can deduct only include paying for necessary repairs and general maintenance.
Because landlords own their properties and are affected by their rental income, they may feel entitled to control the tenancy completely. However, in the United States, there are many laws that protect tenants by limiting the actions that landlords can take while managing their property.
Generally, as a landlord, you cannot:
Managing commercial spaces is not necessarily that different from managing residential spaces. Like with residential spaces, you should continually upgrade and maintain your space to attract long-term, quality tenants.
When you create a lease for a commercial space, a business owner may want to include terms pertaining to regular maintenance as commercial spaces can come with more complicated equipment, such as industrial kitchen appliances.
In terms of intended use, commercial properties have more variety than residential ones. Residential spaces are homes meant for living while commercial properties can be warehouse spaces, retail stores, restaurants, or offices. Generally, jurisdictions have varying health and safety guidelines for these different types of commercial spaces.
Therefore, when you own a commercial rental property, you need to have at least a basic understanding of your space and its property-specific regulations. Additionally, you should know the zoning restrictions for your property. For example, some commercial properties are only zoned for office use and cannot be used as restaurant space.
If you manage residential rental properties, you may have more hands-on responsibilities than landlords who only oversee commercial spaces. Generally, tenants of commercial spaces agree to more responsibilities than residential tenants and coordinate repairs and maintenance on their own. Of course, the terms of the lease agreement will ultimately determine each party's responsibilities.
Often, commercial tenants only use their spaces during the day. If this is the case, as a commercial landlord, you can likely deal with all your landlord responsibilities during normal business hours.
As the owner of a rental property, you have the option of managing your rental property on your own or hiring a property manager. If you hire a property manager, you retain your ownership stake in your property while paying them to keep it occupied and deal with renters.
Property managers have a wide range of responsibilities that can make your life much easier. When you hire a property manager, you can work with them to determine the exact tasks that you want them to complete. You could have them be responsible for any or all of the following tasks:
There are many pros to hiring a property manager. As professionals who specialize in property management, they stay informed on the landlord-tenant laws of a certain jurisdiction, ensuring that your interests are protected.
Additionally, if they work for a property management company, they may have access to valuable resources that most property owners do not have. For example, when something breaks in your rental property, a property management company may have an established relationship with a contractor and you may receive discounted service fees.
The amount that you'll pay for a property manager's services will depend on the level of service you require. You will pay more if you hire a property manager to take over the responsibilities associated with your rental property completely. If you delegate certain tasks to a property manager, but retain some level of involvement with managing your property, you will probably pay less.
Generally, if you hire a property manager through a property management company, they will charge between 8 to 12% of the monthly rental value of your property, plus expenses. However, this isn't always true as some companies charge a monthly flat rate.
As a landlord, you set yourself for success by understanding the documents that you need, the relevant landlord-tenant laws, and the tax implications on rental income. When you take the time to learn about your obligations, you can prevent disagreements with your tenants and protect yourself from costly legal battles.
Whether you hire a property manager or own a residential or commercial rental space, staying organized with the right documents will ensure a smoother and more enjoyable tenancy for everyone. When you create positive experiences for tenants, they are more likely to respect your property and renew their leases, ultimately creating less work for you.
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Whether you have a single tenant in your basement or manage an entire apartment building, these documents help you protect and manage your property.
Adenda al Contrato de Arrendamiento
Una Adenda al Contrato de Arrendamiento le permite añadir información a un contrato de arrendamiento existente. Cree su documento de manera gratuita y...
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Aviso de Desalojo
Un Aviso de Desalojo es enviado por el arrendador al inquilino. Ofrece la posibilidad de desalojar al inquilino solucionando problemas.
Rental Inspection Report
A Rental Inspection Report records the condition of a rental property when a tenant moves in, and again when a tenant moves out.
Lease Amendment
A Lease Amendment is used to make changes to an existing lease (e.g. changing the permitted use of property or term length). The original lease remain...
Rent Receipt
A Rent Receipt is used to keep track of full or partial rent payments.
Lease Assignment Agreement
A Lease Assignment Agreement is used when a tenant wishes to transfer the entire interest that they have in the property to a third party. The third p...
Commercial Lease Application
A Commercial Lease Application is used by landlords, lessees, and property managers to collect information on potential business tenants prior to leas...
Notice To Enter
A Notice to Enter is a written letter informing the tenant that the landlord or property manager will be entering the property in the near future.
Rent Increase Notice
A Rent Increase Notice is used to inform a tenant of a future increase to their rent payment.
Commercial Lease Notices
Commercial Lease Notices inform tenants of eviction, issues to resolve, or lease termination.
Offer to Lease
An Offer to Lease states your intent to rent commercial property to a landlord or property manager.
Landlord's Consent to Lease Assignment
A Landlord's Consent to Lease Assignment is a form of written permission provided by the landlord in order for the original tenant to transfer all rig...