Sublet the Right Way

Written by on September 2, 2011 in Forms & Leases, Landlord Tips, Management - No Comments
Houses-in-a-Row

When setting up their property management business and drafting apartment leases, landlords have to make some decisions about how they will handle future situations. One of these future situations includes subletting, or allowing a new tenant to take over the remainder of your current tenant’s lease. Some landlords are weary of this practice and think it will involve a lot more work on their part. However, it’s good practice for landlords to allow tenants to sublease their apartment if necessary.

There are several reasons this decision in beneficial to the landlord. First, it helps secure good tenants that might be nervous about committing to a year or two year lease. Second, as long as there is a clause in the apartment lease agreement stipulating a sublease tenant must be approved by the landlord, there is little risk of ending up with a bad tenant. Third, landlords may end up with a longer tenancy from the subleasing tenant and minimize their turnover costs. Finally, subleasing can help landlords avoid having tenants skip out on their lease.

Once you’ve decided it’s a good idea to allow for subleases, here’s how to make sure you do it right.

1. Include a clause for subleasing in your rental lease agreement. The following is a simple addition to a lease that will protect the landlord in subletting situations:

Resident shall not assign this lease, or sublet any portion of the leased premises, for any part or all of the term of this lease without prior written consent of the owner/agent.

Owner/agent agrees to release resident from this lease if resident finds a replacement resident acceptable to owner/agent, who will sign a new lease for the remaining term. Owner/agent shall exercise good faith and reasonableness in accepting a replacement resident.

2. Discuss your current tenant’s timeline and remind them of your qualifying standards that all of your residents must meet. At this point, it is your tenant’s responsibility to find a new tenant, but landlord’s should assist them if absolutely necessary. Costs for advertising can be charged to your current tenant if any are incurred.

3. Once your tenant has found potential subtenants, you need to run a background check to screen the applicants. As long as they meet your qualifying standards, give them your approval.

4. Draft up a sublease agreement and have all parties involved sign it. This agreement will make sure that all parties are on the same page and know what is expected. Here is an example Sublease Agreement Template. Please note that some cities and states have specific ordinances pertaining to subleases. Check your local laws to make sure you are in compliance.

5. Go back to business as usual. Reflect on the fact that you have a new qualified tenant and did not have to suffer any vacancy time.

Photo by: Claire L. Evans

Landlord Basics – How to Deny a Renter

Written by on April 25, 2011 in Landlord Tips, Management, Screening - 4 Comments
Deny-a-Renter

When you manage rental property, there will come a time when you have to reject a potential renter. Of course there are several valid reasons to turn down a renter, but discrimination is not among them. Be sure to follow all Fair Housing laws when corresponding to prospects and renters alike.

A landlord can lawfully reject an applicant for the following reasons:

  • Lying on the credit application
  • A criminal background check that revealed past records
  • Poor credit history that falls below the landlord’s qualifications
  • Insufficient income to pay the rent
  • Past evictions
  • Unable to meet terms set by the landlord such as a pet policy or occupancy standards

In order to deny renting to someone with one or more of these issues you will need to document that it exists. This will help prove your case should you need to in a court of law.

When informing a prospective renter of the application’s denial, you should provide a written rejection letter along with a verbal explanation. Although informing them verbally is not required, these applicants will need to look for another place to live so, it is courteous to inform them quickly. Landlords need to be concise and direct when explaining why the renter was denied. Being vague and trying to not sound mean can lead to trouble and discrimination claims.

Landlords should keep copies of denied applications and rejection letters for at least 5 years. You should always be prepared if a former applicant chooses to file a claim against you stating discrimination took place. Good record keeping will keep you from getting into “he said, she said” arguments and help you easily explain the situation to a judge. If a renter is denied based on the credit application / score, he or she is entitled to an explanation and copy of their report from the credit bureau. Your tenant screening solution should provide you with the necessary information to pass on.

It is best practice to make sure that a tenant’s application is completely approved and the written lease signed before handing over the keys to your apartment. If the application is denied after possession has taken place, you will have little recourse and may be forced to face eviction. Landlords may encounter renters who are looking to moving in very quickly, but this is often a red flag. Take the time to properly approve and accept your tenant’s application and rental agreement. The little extra time could save you many headaches and lots of money down the road.

Photo by: Thomas Hawk

What’s needed in a Rental Agreement?

Written by on March 22, 2011 in Landlord Tips - No Comments
rental-agreement

When renting out your property, you need to have a rental agreement or lease. While agreements shorter than 12-months do not need to be written to be binding, oral agreements are difficult to defend in court should your tenant not fulfill the terms of the lease. Here are the essential parts of a written lease every landlord should include.

The names of the tenants and landlord – The full legal name of each tenant should be listed on the rental agreement or lease as well as the name of the landlord. This includes the name of the corporation, partnership, or LLC if the landlord is not an individual.

The physical address of the property - The address also includes any specific unit number.

The contact information for the owner or property manager – Tenants need a way to correspond with their landlord. This contact information should include the mailing address and phone number where the landlord can be reached.

The length of the tenancy – Rental terms can range from weekly, monthly or yearly rentals. Be sure to specify if your tenants will be living in your rental on a month-to-month basis or for a set period of time.

The amount and nature of any security deposit – You must include how much your tenants paid as a security deposit and if any of these monies are nonrefundable. Not all states allow for nonrefundable deposits so be sure to check with your state.

The rent amount - The amount due for rent should be listed in a weekly or monthly amount depending on how your lease agreement is set up.

The amount of late fees and how they are calculated – Late fees are assessed when tenants have not paid their rent by the due date or by the end of the grace period. The grace period should be spelled out and is usually 3-5 days after the due date. Late fees are often a flat fee or an accrued amount where a fee is charged each day the rent is late.

Any additional fees that are the responsibility of the tenants – The rental agreement should list out any utilities and specify which are paid by the landlord or tenants. If parking is an additional expense this should be included on the agreement.

What maintenance responsibilities are required of each party – The landlord is ultimately responsible to make the property inhabitable, but the parties can agree to have the tenant pick up some of the maintenance burden like lawn care.

The names of any additional occupants – It is recommended that all persons over the age of 18 be listed as a tenant and sign the rental agreement, however children should be listed as occupants of the rental property.

If the property is rented as unfurnished or furnished – If you are renting a furnished rental, take care to document and list all items included in the property. These items can be listed in an addendum to the lease, but should be signed off on by the tenant.

Any use restrictions on the property - Be sure to list the legal and illegal uses of your rental property. If your tenant wishes to run a business out of your residential unit, you do not want to violate any zoning ordinances.

If pets are allowed and what types – Pet-friendly communities are becoming more popular, which may influence your decision to allow pets. You need to list the types and quantity of pets allowed. The rental agreement should also include any pet deposits or additional pet rent.

A clause referring to legal fees – Should you find yourself in a legal dispute with your tenant, a clause allowing the prevailing party to collect legal fees from the other party will be necessary. This will also discourage your tenants from bringing a frivolous suit against you.

A clause referring to rental concessions – In a slow rental market, landlords may find themselves offering free rent to tenants called concessions. You should include a clause in the lease that states if a tenant does not fulfill the terms of the lease, they forfeit these concessions and will be responsible for reimbursement of the free rent.

Lease termination – The rental agreement should state that tenancy cannot be terminated unless done so in writing. This will provide all parties with the appropriate paper trail and records.

Signatures – The most important part of the lease is the signature of both parties. This makes the agreement legally binding.

Photo by: Aidan Whiteley