Rental agreements and lease documents are essential components of the landlord-tenant relationship. They are legal, binding contracts that set out rights, responsibilities, and exclusions on behalf of both parties, spelling out all the pertinent details in ways that are both understandable and enforceable in a court of law.
That being said, rental agreements don’t have to be complicated. Many landlords use standardized documents obtained through the landlord-tenant association, and in most cases, that’s sufficient. Some landlords may need to add addendums or clauses to outline limitations of use, buyout clauses, or other points previously agreed to with the tenant, but that all depends on your priorities and expectations going into the deal.
Certain points are vital and should be included in all rental agreements.
10 Essential Clauses Landlords Should Include in Rental Agreements
1. Names of All Occupants
You need to know who will be living in your unit. If multiple residents, spouses, or roommates are involved, they should be named on the agreement (excluding minor children as they are not responsible under the law). In doing so, you have insurance so that, in case one party skips out, you have a legal remedy to seek the remaining rent from other tenants. You also have the option to terminate the rental agreement if one party violates the terms.
2. Initial Term of Lease and Renewal Options
The rental/lease term is the time the agreement is in effect. Most residential rental contracts have an initial period of 12 months, but that depends on what you’ve agreed to and the type of dwelling you’re renting.
Once the initial term is up, the tenant can give notice to move or continue to rent on a month-to-month basis. Should they choose to move, they must provide a certain amount of notice, usually 30 or 60 days before the agreement expires. If the tenant decides to stay on, the original rent amount is subject to change and can be raised according to local or state guidelines.
In California, the landlord must provide a minimum of 30 days’ notice for maximum increases of 10% per year. That does not mean a landlord should increase rent by 10% yearly—local ordinances dictate those amounts—but 10% is the max. What you’re allowed to charge could be much less, depending on where your property is located. (The Tenant Protection Act of 2019 (AB 1482) restricts rent increases in any 12-month period to no more than 5% in addition to cost of living increases, or 10%, whichever is lower. For increases that take effect on or after Aug. 1, 2022, due to inflation, all the applicable CPIs are 5% or greater.)
3. Rent Payment and Liability
The rental agreement sets out the amount of rent to be collected, what day it’s due, any grace periods allowed (if any), preferred payment methods, and penalties for late or non-payment of rent. As discussed in #1 – Names of All Occupants, all tenants are responsible for upholding the terms of the agreement, including covering the full amount of the rent, even if one tenant fails to pay. This liability should be communicated to each tenant as it should encourage them to be selective when choosing others to share space with.
4. Policies and Rules of Conduct
Some rules are pretty standard, such as pet policies or prohibiting criminal behavior, harassment, noise curfews, parking regulations, smoking, etc. If you have specific rules or restrictions that you feel are critical to a successful tenancy, then you should, by all means, spell them out. For example, you might allow some pets if they meet certain criteria, such as small animals or specific breeds, require tenants to keep pets leashed, restrict smoking to designated areas on the property, and so on. There are no hard rules here; it’s whatever matters to you and/or neighbors.
If you are renting a condo or if there is an HOA that oversees policy in the building, you must disclose their rules as well, typically in the CC&Rs. These might include restrictions on what the tenant can put on the balcony or front door, parking restrictions, guest parking, outdoor activities, and more.
5. Security Deposit
In California, a landlord may ask for two month’s rent as a security deposit in advance of move-in. When the tenant moves out, landlords have 21 days to return the deposit, minus any deductions for cleaning, unpaid rent, or repairs above and beyond normal wear and tear. In many cases, tenants elect to clean the unit themselves before moving to get their deposit back in full.
You can also designate part or all of the security deposit towards the last month’s rent, but this must be clearly stipulated along with the amount of notice required for the tenant to enact the last month’s credit. If not explicitly agreed to, landlords don’t have an obligation to apply the security deposit towards the last month’s rent.
6. Entering the Unit
Landlords must give tenants 24 hours’ notice before entering the rental unit for repairs, maintenance, inspections, and other reasons other than emergencies. This should be clearly stated in the lease, as well as the hours to which these visits will be restricted (usually during regular business hours). In emergencies, no advance notice is needed.
7. Detail Your Maintenance and Repair Policies
In regard to maintenance and repairs inside the unit, ensure that your tenants know what they are responsible for and what you are responsible for. For example, tenants are responsible for the damage they cause beyond normal wear and tear. They are also expected to keep the property clean and free of debris. Landlords may also prohibit tenants from painting and doing their own repairs unless you approve them.
Be sure to outline the process for submitting complaints, repair, or maintenance requests and the timeframe for them to expect a response.
8. Renter’s Insurance
California law does not require tenants to carry renter’s insurance, but landlords may request it as part of the lease agreement.
9. Required Disclosures
Check your local and state ordinances for disclosures you might need to include in your rental agreement, like bed bugs, mold, or lead-based paint history. You might also want to cross-reference your rental agreement with local laws to ensure they align with local safety codes, anti-discrimination laws, and so forth.
10. Contact Information
Let your tenants know how you prefer to be contacted and provide them with various ways to do so. For example, you might want to be notified in writing of their intent to move out but prefer repair requests be made via text or phone call.
If you’re a new landlord, consider having a property management company or attorney review your rental agreement. If you have questions, we’re always here to help!
