How to Create a Fool-Proof Lease
Are you currently leasing homes in Hawaii? If so, you’ve probably put a lot of hard work into marketing your property and selecting good tenants. Those investing in homes in Hawaii often make the mistake of fixating on the selection and preparation of a rental property, forgetting that the process of marketing and screening tenants is also incredibly extensive. Finally finding a good tenant is therefore a huge relief for most investors.
You’ve worked hard to find the right tenant; probably harder than you anticipated. But even if you have quiet, accommodative tenants, your relationship is likely to falter if you fail to craft an extensive and thorough lease delineating all of your policies and expectations. Damages and disputes are inevitable aspects of being a landlord, but creating a sound lease can help to prevent conflict, legal recourse, and failure to abide by lease policy. Below we discuss some critical and sometimes overlooked facets of drafting a good lease.
Timely Payment
You will, of course, want to stipulate in your lease when you expect tenants to submit their monthly payment. The first or last day of the month is common, as it is easier for tenants to remember. You will also want to clarify that tenants have an obligation to pay their rent before they pay their utilities. It is important to establish clear consequences for late payments to prevent opportunistic tenants from interrupting your cash flow. Some landlords even incentivize timely payments by reducing rent if a tenant pays in advance.
Substance Policy
There is a stark difference between drinking a glass or two of wine a night and blatantly abusing drugs and alcohol. If a tenant is frequently intoxicated, he or she is more likely to cause property damage or suffer an accident. Although some intoxicated altercations are minor, the potential damage could end in a fiscally devastating lawsuit.
If you are leasing homes in Hawaii, it is important that you establish an explicit drug and alcohol policy. Prohibit the abuse of substances and the use of any illegal drugs. You may be inclined to be flexible with an occasional drunken disturbance, but excessive permissiveness could put you in a bind. Strictly adhere to your policy and implement tangible consequences for reckless behavior.
Mediation
Leasing homes in Hawaii is an operation in investing, not in babysitting. If you have tenants that come into conflict with one another, you should not have to act as a communicator or mediator. You should clarify in your lease that complaints regarding another tenant should be relayed to you in a timely manner. If a tenant is disturbing or dangerous, you will want to know in order to address the problem. However, you also want to state that tenants are responsible for negotiating minor squabbles on their own terms. You always want to be aware of tenant conflict, but it is not solely your duty to solve it.
Cleanliness
If you’re not the one living in your rental homes in Hawaii, you need not concern yourself with its cleanliness, right? Wrong. Failure to maintain cleanliness could lead to a host of problems, such as mold infestation, stained tiles and carpets, foul odors, stubborn soap scum, and more.
Be clear with your tenants that you expect them to maintain basic cleanliness. Explicitly state that, should permanent damage arise from their mess, they are responsible for covering the costs to fix it. Remind your tenants to take out the trash regularly, as lingering odors may invoke complaints from neighbors.
Lockouts
Accidental lockouts could happen to anyone, and they can be particularly stressful for tenants in a time crunch. Should their lockout become your problem, you’ll be assuming some of that stress as well. To avoid frantic demands for a spare key, establish a clear lockout procedure with your tenants. If you wish, you can hold on to a spare key and ask a tenant to call you directly if he or she runs into a lockout scenario. It may be more convenient, though, to establish a discreet hiding spot for a spare key.
Travel
Establish in the lease that tenants must alert you to any extended travel plans. If a tenant is planning to travel for an extended period, you should regularly check the property to ensure that there are no security or utility issues. You don’t want a tenant to return from a long trip only to discover damage or a break in that you aren’t prepared to deal with.
Security
It is important to mandate in your lease that tenants keep houses and windows locked at all times. Doing so is particularly important in areas with high crime rates. Further, it is absolutely essential to establish that you are not responsible for covering any losses that result from a break in. Should you fail to include security stipulations in your lease, you may be looking at a serious lawsuit.
Fire
You would think that someone old enough to rent a property would be relatively familiar with basic fire safety. However, you’d be surprised how common sense fails some individuals. Prohibit the lighting of candles in your lease, and prohibit tenants from using grills indoors (yes, it happens). Depending on your neighborhood, you may also want to prohibit the use of fireworks. Whether or not you permit smoking in or outside of your property is a personal choice, but you absolutely must include it in your lease.
Furniture
If your rental property contains any furniture, be clear that tenants are responsible for replacing furniture that is stained or broken. Record the condition of your furniture prior to tenant move-in using video and photography in case you end up with a lawsuit on your hands. Be clear that indoor furniture should never go outside, and vice-versa.