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Rental Agreements and LeasesRental agreements and leases can be thought of as the glue that holds the landlord - tenant relationship together. Their purpose is to establish all of the "legal ground rules" of the tenancy. Here's the low-down on them...
Rental Contracts
The purpose of a rental contract is to create a legally binding relationship between the landlord and tenant. This contract spell's out the rights and responsibilities of each party during the period of tenancy.
Both rental agreements and lease agreements differ by the time period of the tenancy. Rental agreements have no set time period, whereas lease agreements do have a set time period of residency.
Each type of agreement can be either written or verbal, such as the handshake method of the good old days. Unfortunately, in today's world a handshake holds very little value, so it's better to play it safe and put all agreements in writing.
Written rental contracts
are also beneficial from the standpoint that they create a better description of all the rules and regulations of the tenancy. This fact alone makes it worthwhile by reducing problems and misunderstandings between landlords and tenants.
In addition to having a written rental contract, it is also beneficial to provide a new tenant information kit to any new tenants moving in. Such a kit acts as a rider to the primary rental contract and outlines the specific "house-rules" that apply for the particular property and rental unit.
The reality of leases is that they are only as effective as the quality and honesty of the tenants who are "bound" by their rules. That's why screening tenant applicants is the most important job of a landlord.
A standard fixed-term lease , having a tenancy period of one-year or more, is generally preferred over a rental agreement if income security is the landlord's top priority.
Written lease agreements contain a series of paragraphs, or lease clauses , that spell out all the rules and regulations of the tenancy. It is important to have a real estate attorney review any written lease to ensure that all of its clauses are legal.
If a tenant fails to comply with the rules and regulations specified within his or her lease, then the landlord can attempt to correct the situation by enforcing the provisions of the lease in court. Enforceability of leases in the real world can, unfortunately, sometimes turn out to be less than satisfactory because of the sheer bureaucracy of the court systems.
A comparison of rental agreements and leases will show that they each have their own benefits depending on the rental situation at hand. One may be better than the other for satisfying the specific needs of the landlord.
As mentioned above, a verbal or written rental contract can be made by landlords to establish a tenancy. However, the written form as stated previously is generally preferred.
For a great source of terrific information on all types of rental contracts, please visit The Landlord's Library book collection. You'll have all the information you'll need on the subject of residential landlording right at your fingertips!
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Once you've purchased an investment property, hopefully a good one, and rent it out to tenants, both you and your tenants become "legally bound" by either rental agreements or leases, also known as rental contracts.