Building a strong lease: All Seasons, LLC, CRMC has a strong lease, providing property owners with the security they need to know their investment property will be well protected. If you have a home you would like to rent in the Colorado Springs area or are considering purchasing investment property, call All Seasons today at: (719) 632-3368. We are on your side!
Taken from a speech entitled, A New Lease...on Life delivered on February 15, 2018, at the 12th Annual Landlord’s Symposium in Colorado Springs by Matt Rogers, RMP, President of All Seasons, LLC, CRMC
Legal Requirements
The Colorado Real Estate Commission does not have an approved standard lease, so creating a strong lease is up to the landlord and their attorney. All Seasons, LLC, CRMC has been in business since 1986, and has plenty of time to learn by trial and error. We believe that our lease is very strong, something our owners can rely upon. Communication between our staff, owners, and residents is also something we work very hard to make work seamlessly, saving everyone heartache and trouble. We’d like to share some of what we’ve learned with you here.
Please note that this should not be considered legal advice, and you should consult your attorney in all things relating to the creation and changes made to your lease.
Types of Leases
Two types of leases are generally used: the broker-supplied lease, and the owner-supplied lease.
Broker-Supplied Lease
Our broker-supplied leases are drafted and approved by an attorney before they're used, or they could be deemed unenforceable. This is a Real Estate Commission Requirement.
Owner-Supplied Lease
If an owner requests that the Property Manager use an owner-provided lease (that the owner drafted), it cannot be changed without an attorney approving the changes, or it could be considered to be illegal practice of law since it wasn't attorney approved. All Seasons, LLC, CRMC does not use owner-provided leases.
To make sure your lease follows these principals, include this statement at the bottom of the lease and all addenda: This is a binding, legal document. If not understood, legal, tax, or other counsel should be consulted before signing. This form has not been approved by the Colorado Real Estate Commission. It was drafted and approved by {your attorney here}, legal counsel for {your brokerage firm here}.
Lease Must Haves
Definitions
It is always important to define the terms you use in a lease, so that all parties involved understand clearly what the lease is saying. Here are some important things to define.
- Parties - Who is signing the lease?
- Address of property - Where is the property?
- Any other terms important to the use of language.
Expiration
In addition to defining what needs to happen when the lease is enforced, add what needs to happen when the lease expires. It’s not as obvious to think of defining what needs to happen after the lease expires!
- What happens upon expiration – does the lease simply terminate or does it continue on a “month to month” basis, if there’s no lease extension?
- What day and time does the lease expire?
- How much notice is required before vacating?
- Does notice have to be written, or can a tenant give notice verbally?
Costs
Costs are one of the most important parts of the lease! Everyone wants to know who pays what costs and when. Don’t get caught in the trap of thinking something is assumed—everything must be legally defined.
Rent
- Rent amount - exact amount paid by the tenant.
- When is the rent due?
Late Fees
What are the late fees, and when do they apply?
Security Deposit
- Security deposit amount
- How long does the landlord have to send the refund after the tenant vacates the property?
(The law says it can be no longer than 60 days and must be stated in the lease if over 30 days.)
Utilities
- Who pays them?
- Penalty for them coming out of the tenants’ name?
Condition of Home
Who is responsible for keeping up the home, including inside and outside? Make sure everyone is clear on this, down to the smallest appliance.
Pets
- Are they allowed? If so, have separate addendum but reference in lease.
- How do you handle unauthorized pets? Penalty? Are visiting pets authorized?
- What if the tenant adds a pet, or changes the pet they have?
General Maintenance
- How is it handled and who is responsible for cost?
- Policy on tenant alterations
- Free reign? If not, say so!
- Discuss somewhere that they are accepting the property “as is”.
Grounds Maintenance - Yard maintenance/snow removal
- Who is responsible?
- What are they responsible for?
- Who maintains the sprinkler system, if applicable?
- What will you do if the tenant isn’t maintaining?
Ins and Outs
You don’t want your tenant to be surprised that you have the right to check on the property or show it to potential tenants. You can soften this idea by letting them choose the best times of day for you to do this, but depending on the number of homes you manage, it could be unrealistic to have the tenant set the schedule.
Right of reentry
- Under what conditions?
- How much notice?
- Showings for sale and for rent?
- Times of day?
Parking
Make sure the tenant knows where they can park and where they cannot. If this is in the lease, there will be no mix-up.
Use of Home
Will you allow the tenant to use the home for something other than their residence? This is an important thing to get clear in the beginning. If there are neighborhood covenants, make sure these are taken into consideration.
- Use of premises
- In-home Daycare?
- At home business?
Renter’s insurance
Required or strongly recommended?
Occupancy
- Delay of occupancy - what happens if they cannot move in on the lease start date?
- Subletting
- Termination
- Standard
- Military clause
- How to terminate due to default of tenant
Leaving
- Lease Breaking
- Reletting fee
- Other penalty?
- Move out procedures
- How does it work?
- Do you do a physical walkthrough with the tenant?
Behavior
- Holding over
- Can be problematic when it happens!
- Penalty?
- Disturbances - noise, threats to neighbors, odors, etc., how are they handled?
- Smoking policy – including marijuana!
Contact
- Specify all contact information
- How do you prefer to be contacted?
- Importance of tenant updating - don’t let loss of contact be used as an excuse for anything!
- Estoppel certificate
- Tenant agrees to complete upon request
- Acknowledge they currently occupy with valid lease, management has performed all duties, etc.?
Details
- Joint and several liability - each party is liable for full performance.
- Heirs and assigns - binds and benefits all successors and assigns of the parties
- Rules and regulations (in covenant-governed communities)
- should state they are part of the lease (and provide them to tenant!)
Appliances
- Inclusions
- List appliances included
- Air conditioning?
- Don’t forget smaller appliances like beer refrigerators
- Who is responsible for repairs?
- List addenda that are also part of the lease
Addenda
Addenda will become your friend. As you learn what can go wrong, cover it all here. These are used on an as applicable basis.
- Lead-based paint
- Mold
- Asbestos
- Pet addendum
- Landscape addendum
- Crime-free lease addendum
- Cleaning and property standards
- Sight unseen
- Hot tub
- Furnished property
- Security deposit addendum
- Cosigner addendum
Presenting to tenants
Now you have your lease up to the standard you think covers everything. You’ve had your attorney approve it. All is in order.
But then the doubts set in. Is it too long? Too strict? Will a potential client even sign a lease with this language in it?
There are ways to take the pressure off you if presenting a lease isn’t your strong suit. Video is one of those ways. If you go through the requirements in a video, you only have to do it once for the cameras, and then show the video to all prospective tenants. Then afterward you can be there to answer questions.
You may run into parties that refuse to sign the lease however, that’s better than someone moving in with a different expectation than you have. Everyone likes well-defined rules.
One way to present your lease to tenants is to use video. Why?
- Provides consistency
- Ensures you’re accurate
- Time savings!
- Takes the pressure off
Final thoughts
Your lease is a work in progress and should always be one. When you learn something the hard way, put it in the lease. Review your lease regularly and involve your team in doing it. Ask them what concerns or questions they’ve received from tenants or owners, and what problems they’ve addressed.
The lease is your best ally. Make sure it’s working for you!
All Seasons, LLC, CRMC has a strong lease, providing property owners with the security they need to know their investment property will be well protected. If you have a home you would like to rent in the Colorado Springs area or are considering purchasing investment property, call All Seasons today at: (719) 632-3368. We are on your side!
To read more about Colorado real estate lease requirements, go to: https://www.colorado.gov/pacific/osa/reforms
