Your Guide to Making a Solid Lease Agreement for Your Rental Property

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Bigham & Associates Lease Agreement

First and foremost, congratulations on becoming a landlord. You will soon be on your way to earning passive income from your Austin rental property for years to come.

If this is your first property, then you are probably asking yourself – what step do I take from here?

The first step after becoming a property owner is to draft a lease agreement. You’ll be glad you drafted a solid lease agreement when that time comes.

Before we get ahead of ourselves, it’s important to first know what a lease agreement is.

A lease agreement is a legally binding contract between you and your Austin tenant. It contains the rights and responsibilities of each party to the lease. It’s important that it contains every important detail to avoid larger problems later on.

At a minimum, here is what a solid lease agreement should include:

1. All Basic Clauses

The first two basic clauses your lease agreement should include are your rental property’s address and the names of all adult tenants living in the property.

Including the names of all adult tenants living in your property will allow you to enforce the terms of the lease on any one of them. For example, should rent fall late, you’ll have a right to ask it from any of the adult tenants.

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The third basic thing your lease should include is the lease term. Specify when the tenancy starts and when it ends. In most cases, this is usually one year.

2. Rules on Rent 

Many issues can arise if you fail to give your tenant precise details in regards to rent. Remember, rent is essential to the success of your Austin rental business. As such, the last thing you want to have issues on is on rent.

The following are the details your lease agreement should cover:

  • The dollar amount of rent. Some states limit how much landlords can charge. There is no limit in Texas, however. You can charge any amount you want so long as it’s within reason.
  • When it is due. Generally speaking, rent is usually due on the first day of the month. You can also specify what happens if this date falls on a holiday or on a weekend.
  • Where rent is due. Will you require your tenants to mail it to your business address? If elsewhere, make sure to mention it.
  • The consequences of paying rent late. Also, mention if the tenant will be liable for paying late fees.
  • What happens should a rent check bounce. Will you hold the tenant liable for any extra fee?
  • How rent should be paid. Good options include credit card, cash, money order, and/or check.

3. A Clause on Security Deposit

Most states hold landlords to strict guidelines as to when and how to return security deposits. Texas is no exception.

According to the Texas landlord-tenant law, landlords must:

  • Include reasons that can make them withhold part or all of the tenant’s security deposit.
  • Provide a written checklist detailing their existing property’s condition. Then, both you and your tenant must date and sign the statement. If you fail to provide your tenant this checklist, your Austin tenant could be entitled to their full security deposit as well as reasonable court costs and attorney fees.
  • Not make a tenant’s security deposit non-refundable. You can, however, charge non-refundable deposits separately. A good example of a non-refundable deposit could be a pet deposit.
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  • Store a tenant’s security deposit in either of three options. You can store it with an escrow agent. You can also place it in a state or national financial institution. The last option you have is to store it in a trust account.
  • Provide a receipt to your tenant after collecting and depositing the security deposit. The receipt must be written.
  • Return the tenant’s security deposit within 14 days after the tenant moves out.

4. A Clause on Property Maintenance

Your lease agreement should also be clear on who is responsible for what in regards to property maintenance.

You could make your tenant responsible for things like:

  • Not causing careless or negligent property damage
  • Maintaining appliances that you have supplied
  • Properly operating all plumbing and electric features
  • Maintaining plumbing fixtures
  • Disposing of garbage
  • Keeping the unit safe and sanitary
  • Following buildings and housing codes

Remember, you also have a role to play when it comes to property maintenance. In fact, the landlord-tenant law requires you to provide safe and habitable premises.

Broadly speaking, here is what rental property maintenance involves:

  • Supplying running water
  • Providing proper trash receptacles
  • Keeping vital services functioning
  • Maintaining common areas
  • Performing repairs
  • Adhering to building codes

5. Rules on Subletting

Subletting is when a tenant allows a stranger or a friend, not on the original lease, to live with them. The intent of this is usually to help in covering part or all of the rent.

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There is one question that Austin landlords often ask – should I or should I not allow subletting of my rental property?

Subletting has its share of pros and cons. For example, on the bright side, it means you don’t have to hunt for a new tenant. This is usually the case with tenants who need to move but still don’t want to give up their apartment entirely.

Conversely, allowing subletting could leave you with an undesirable tenant.

Luckily, most of the shortcomings associated with subletting can be eliminated by including some rules on subletting in your lease agreement. For instance, you could state that a sublet must first pass your screening test to live in your property.

Including all these clauses in your Texas lease agreement will protect both you and your tenant against unforeseen circumstances. If you need help drafting one, please consider hiring professional services.