Property Management Education

Top 5 Lease Agreement Clauses

System - Sunday, July 1, 2018

Whether you self-manage your rental property portfolio or rely on a third-party property manager to take on the task for you, there are a few critical clauses that should be included in your lease agreements. Below we detail what we’ve deemed the top five clauses that should be written into your leases to ensure your own protection as well as clearly define your role and relationship with your tenants.  

  1. Month-to-month lease terms
    
If you own Colorado rental property, it’s important to note that by law, if a lease expires and nothing happens, your lease automatically defaults to month-to-month. You want to avoid auto renewing month-to-month leases, especially in states like Colorado, who experience extreme seasonal weather. In winter months, if you have an unforeseen vacancy, chances are your costs are going to increase as you may struggle to place a new tenant quickly. 
We suggest adding a clause, including a large percent increase, in your lease agreement to avoid this scenario. 
Sample clause: “If we have not received a signed written notice of intent to vacate from you, and your lease term has expired, you will be on a month-to-month lease term. Your rent will increase by __% per month on a month-to-month term.” 


  2. Pets
    
If you decide not to allow pets in your rental property, be sure to include a clause stating the ramifications your tenant can expect to incur if they break your stated agreement. Include a clause with a per-day cost to discourage tenants to bring prohibited animals into your property, and encourage a swift removal if they do break the agreed-upon rules. This cost will also cover the full inspection you will need to conduct after the pet is removed to ensure there was no damage incurred during the animal’s stay. While we encourage landlords to allow pets in their rental properties (with the inclusion of a pet addendum in your lease), if you decide against this, include a clause to ensure clarity upfront that you and your tenant are aligned on the expectations. 
Sample clause: “No pets of any kind are allowed (even temporarily) anywhere on the premises, unless we’ve so authorized in writing. If we discover a pet on the property you will pay us $__ per day until the pet is removed plus an inspection fee of $__.” 


  3. Marijuana
    
As we all know, marijuana is legal in Colorado. However, as a rental property owner, you have the right to prohibit it as long you clearly state so in your lease. We recommend including a clause prohibiting the usage, possession, and growing of marijuana in your rental property. Growing, in particular, can cause mold, humidity, and other issues you as a landlord don’t want to deal with. 
Sample clause: “Recreational marijuana use is legal in Colorado. However, both Colorado law and federal law give us the right to prohibit it. Marijuana use, possession, and/or growing is prohibited on the property and violators will be evicted.”


  4. Appliances
    
Colorado law states that if you provide something in your rental property, you are responsible for maintaining it. However, if a tenant is abusing an appliance, you are not required to replace it. Include a clause in your lease agreement to mitigate future issues with tenant negligence of your property.
Sample clause “If any appliances cease to function we may or may not repair or replace the appliance at our discretion.”


  5. Subrogation of Insurance
    
Put simple, subrogation in the case of rental properties means your tenant elects their insurance to sue the landlord if anything bad happens. Insurance companies have deep pockets, meaning you as a landlord don’t want this to happen! Our attorneys recommend adding a clause prohibiting subrogation in your lease agreement. 
Sample clause: “Unless prohibited by law, Resident waives any insurance subrogation rights or claims against Landlord, Owner, and their insurers.”

    As always, our team is here to serve as a resource for you. We have these clauses and many important others already prepared and written into our lease agreements. If you have questions about rental property leases or anything else related to the management of your investment property, give our team a call. 303-255-1990


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