Rental Agreement Forms
Even if you are renting to friends or family members, disputes sometimes can arise between both parties. A rent agreement form can minimize the chance of any conflicts by having a written, signed contract.
This page provides an overview of this valuable legal protection, including a look at the lease agreement forms by state and how the leasing process works.
How Does the Leasing Process Work?
Although laws regarding security deposits and disclosures may vary from state to state, the leasing process follows similar steps throughout the nation. Here are the steps a landlord takes before signing a lease agreement with a tenant.
1. Conduct a Credit and Background Check
Using information from the rental application, a landlord will conduct a background and credit check on the potential tenant. For example, the landlord may call the applicant's employer and the previous landlord to verify the information and gain insight into the applicant's character.
Here are the typical elements of the credit and background check:
Credit Score. The average American's credit score falls in between 660 to 720. The landlord uses this score to gauge whether the tenant will be reliable in paying their rent on time each month. If the applicant's score is below average, the landlord may request a larger security deposit or additional proof of income.
Criminal Background. The landlord uses this information to find out if the tenant has been convicted of any crimes or poses any risk to the property or community.
Employment Status. Along with the credit score, the landlord may want to confirm the applicant's employment and income status. Landlords often asked for two months' pay stubs as part of this step.
Tax Returns. To go even further into the applicant's financial status, the landlord can request the applicant's federal tax returns for the last two years.
Rental Reference. The landlord can request a reference letter from a previous landlord. In addition to inquiring if rent was paid on time, the landlord may ask the former lessor about the tenant's character. Additionally, most tenant background checks will disclose any previous evictions.
2. Choose the Rent Agreement Type
If the information from the credit and background check prove satisfactory, the landlord next needs to select the type of rental agreement they want to use. Here are the four primary types of rent agreements.
One year. A one-year lease is the most common type of rental agreement. Neither party can terminate the 12-month timeframe.
Month-to-month. Also called a "Tenancy at Will" agreement, a month-to-month lease has no pre-determined end date. Either the landlord or the tenant can terminate the lease agreement at any time by giving written notice (usually 30 days) to the other party.
Roommate. A roommate agreement creates a binding contract between two or more tenants, including who pays for what room, cleanup responsibilities, and any other details of the living arrangement.
Sublease. This type of rental agreement gives the terms under which a tenant can rent the space to someone else if they must move out before the lease ends.
3. Negotiate the Lease Terms
The next step in the leasing process is to consider the terms and conditions of the rental agreement. Here are the main terms to negotiate.
Security Deposit. A landlord collects a security deposit in the event the tenant defaults on their lease agreement or there is damage to the property discovered at the end of the lease term. The maximum amount for a security deposit is set by each state but is usually equal to one- or two-months' rent.
Monthly Rent. The full amount is due by the date specified on the rental agreement.
Late Rent Penalty. If the rent payment is delayed, the landlord can charge a fee. The agreement must specify any grace period, when the late fee will go into effect and how much the fee is. A typical late rent penalty is 5% of the monthly rent.
Non-Sufficient Fees (NSF). If the landlord's bank returns the tenant's rental check for lack of sufficient funds, the landlord can charge the maximum amount allowable under state law.
Utilities & Services. The contract must specify what utilities the landlord is responsible for paying and which ones the tenant must handle.
Smoking Policy. This part of the contract gives specific instructions on where smoking is allowed or prohibited on the rental property.
Subletting. This provision gives details on the terms (if any) under which the tenant may sublet the property.
Co-Signer/Guarantor. The lease agreement should include the specifics of a co-signer or guarantor's role, including when they are responsible for paying rent or late fees and how they will be contacted about these payments.
4. Sign the Lease Agreement
It is very important for tenants to read all the information in a lease agreement and to ask any questions they might have. After the landlord and tenant have discussed and agreed on the terms of the contract, they are ready to sign a lease agreement.
In most circumstances, it is not necessary to have a notary public as a witness to the signing. All adults living on the property, as well as the property manager or landlord, should sign the lease. If a co-signer is part of the agreement, they need to sign also.
5. Pay Rent and Security Deposit to Obtain Occupancy
After the lease agreement has been signed by all parties, the landlord will request the rental and security deposit payments outlined in the contract. It is typical for a landlord to wait until these payments have cleared before giving the tenant access to the property.
If the payments have cleared and the date of the contract has arrived, the landlord will give the tenant the keys and anything else they need to gain access to the property. In other words, the tenant will be able to move into their new home.