Leasing and Rental Agreements
Get Your Agreements in Writing
Why a handshake shouldn't seal the deal between landlords and tenants.
Not many years ago, small landlords frequently rented their properties on the basis of a handshake -- reaching oral agreement with their tenants on key terms such as the amount of rent and when it was due. Landlords who did provide a written rental agreement or lease often used a jargon-laden form bought at a local office supply store. It might as well have been written in Sanskrit for all the practical guidance it provided to tenants.
This casual approach frequently led to problems, and it is even less likely to work now. The landlord-tenant relationship has grown more complicated, for several reasons: Today, laws and regulations govern all aspects of renting residential property. There is greater turnover in tenants. Landlords have more responsibilities, tenants have more rights, and small claims court makes it easy to take disputes to a judge.
Heading Off Trouble
A landlord who provides no written lease -- or one full of legal gobbledygook -- often finds that the result is chaos. What happens if the fine print in the lease (which neither the landlord nor the tenant actually reads) says no pets, but the landlord turned a blind eye to the cat when the tenant moved in? With no clear agreement written down, every small disagreement -- whether it's over repairs, the fee for a late rent check or deductions made from a departing tenant's security deposit -- has the potential to escalate into a nasty legal battle.
There's really no excuse for not putting a clear agreement in plain English. In addition to heading off disputes, a good lease nudges the landlord to deal with key issues that might otherwise be overlooked. The result? Happier tenants and happier landlords.
Solving Disputes
A solid, complete paper trail is invaluable if disputes do develop -- for example, regarding the landlord's right to enter a tenant's unit to make repairs, or the time it took for the landlord to fix a problem. Landlords can even run into trouble with someone they didn't choose as a tenant. For example, suppose Betty talks to six tenant applicants before renting one of her units. Betty picks Applicant #3 because she feels he is most likely to reliably pay the rent. Two weeks later, Betty gets a call from a lawyer representing Applicant #5, who claims she was discriminated against because she is African-American and a single mother. If Betty isn't willing to pay $10,000 to settle the matter, she'll promptly be sued in federal court for $50,000. Because Betty has no written documentation explaining how she picked Applicant #3, her insurance carrier proposes to pay the $10,000. After all, they point out, the fact that Betty picked a white male with no children looks bad, especially since it turns out that the African-American single mother has a higher-paying job. Had Betty been able to produce all the candidates' comprehensive written applications, their credit reports and references from previous landlords, the result would likely have been different. Betty would have had good written documentation supporting why Applicant #3 was picked -- his credit history and job stability were far better than that of Applicant #5, who had recently declared bankruptcy and had poor references from previous landlords.