August 24, 2020

property manager's must-have addenda

A Property Manager's Must-Have Addenda to Lease Agreements

The purpose of a lease agreement for rental property is to protect all parties to the agreement – property managers, landlords, owners, and tenants – from potential issues during the tenancy. There are common points of information to cover when renting to tenants to spell out the details of each party's responsibilities. Written into the standard lease agreement, these lease clauses cover everything from the term of the rental period, the rental rate, when rent is due, and each party's role in maintaining the property to a stated standard. A property manager needs to anticipate how to deal with unforeseen circumstances and shut down any similar future problems in the future. This is where addenda come into play.

What is a lease addendum?

Drafted by the property manager, landlord, or owner to address a specific issue, a lease addendum is an addition to the original lease agreement. It holds as much contractual weight as the lease itself. Both parties must sign any lease addendum for it to be legally binding, the same way the lease itself needs the signature of both parties. An addendum has easy-to-understand language, usually covers just one issue, and might be one to two pages long.

What common addenda should a property manager add to a lease agreement?

Addendum topics can vary widely, and might be specific to a single property, an entire community, or apply to only one tenant. If your lease doesn't cover an anticipated problem, you can write an addendum and document that both parties agree about how the issue will be handled – you then have a binding lease addendum. A new addendum can only be enforced for the term of the current lease; if the lease comes up for renewal, any new addenda must also be included and signed.

Property managers often consider specific addenda that include:

Subletting — Subletting has not always been a common practice, and thus was not often necessary in the lease agreement. Co-living spaces and short-term rentals like Airbnb continue to grow in popularity; however, it is a lot more common. If you don't have a subletting clause in your original agreement, it's wise to include an addendum that spells out what is – and what is not – allowed in terms of a sublease. The addendum should also state any fee you will charge the tenant for a sublet tenant.

Pet policy — if your standard lease does not address pets, you need a pet policy addendum, no questions about it. In general, pets do not cause problems, but now and then, you'll have a tenant with a pet that tears up the carpet, chews on walls and windowsills, and causes other damage. Your addendum needs to address whether or not you allow pets plus what types of pets you allow – and how many. This addendum should also spell out your pet fee and who will be responsible for repairs for damage caused by pets.

No smoking — Smoking adds a tarry film to the walls, and the smell of smoke seeps into every porous material like walls, carpeting, and curtains. Smoke damage can cost a lot to fix, and even when it's fixed, the unit may be harder to rent to the next tenant. When you add a non-smoking addendum to your lease, you can head off this problem and avoid the risk of future good tenants turning away due to lingering smells or damage.

Direct deposit — if you prefer direct deposit for rent payments to avoid the need to chase down late-paying tenants, you can add a direct deposit addendum to your lease. This authorizes the tenant's bank to withdraw rent from your tenant's account each month and pay you via a direct transfer of funds.

Landscaping — Who is responsible for yard work, landscape maintenance, and the general external condition of a rental property, such as clearing sidewalks of snow? Agree with your tenant about who does what and put it in writing. This will save you a lot of stress.

Occupancy limitations — Most leases list the names of all rental occupants. However, there's always the situation where an individual "visits" and seems to never leave. To head off this problem, write an addendum that puts a cap on the number of people allowed to live in the home. This type of addendum can also restrict occupancy to only those people on the lease and their minor children or dependents.

Legally required disclosures — State and local governments may have addenda that require the signature of all tenants. HUD and the EPA require landlords to include the lead-based paint disclosure in their lease. Check with your state's landlord laws to see any other requirements specific to your area. There may also be addenda to disclose the presence of mold and asbestos.

Renovation — the issue of tenants making permanent changes to a property is often covered in the lease. If it's not, you'll want to add an addendum before the tenants start swinging a hammer. A tenant's renovations can cause property damage because the tenant lacks the expertise to do the work. An addendum can clearly spell out what changes are allowed, what permission is required, and what will happen if the tenant goes ahead with renovations without approval.

Utilities — if your lease does not specify who pays the utilities each month and who will handle the utility transfer upon moving-out and moving-in, you'll want an addendum for utilities.

Bed bugs — Bed bugs have been a huge problem in recent years. Arizona, Colorado, Maine, and New York require property managers to include a bed bug addendum. If bed bugs are a problem in your area, including such an addendum can make it clear at the outset which party will pay to get rid of an infestation.

HOA rules — Homeowner associations have their separate list of rules regarding the community spaces and amenities, maintenance of homes, and many other additions that may be outside a standard lease agreement. These should be written into an addendum for tenants to understand and follow clearly.

Other addenda you may want to add include stipulations about non-permanent features tenants – or you as the property manager – may want to add to the property:

  • Trampoline - use and non-use
  • Fireplaces - use and non-use
  • Water features like a pool or pond - use and non-use
  • Satellite dishes - use and non-use, plus rules for attachment and removal
  • Vehicle charging stations - use and non-use
  • Storage buildings or sheds - use and non-use

Additional addenda could include:

  • Move-out conditions
  • Zero tolerance policy for criminal activity
  • Pest control - treatments allowed or not allowed and who is responsible
  • Smoke detector/carbon monoxide units - who is responsible for installing and maintaining
  • Water/sewer/trash — who is responsible for maintenance and any fees
  • Insurance — if it is required and who is responsible for paying
  • Home is leased "as is" — affirming the move-in condition of the home and tenants know they are leasing it as such

In many cases, your original lease agreement already includes these clauses. If the standard lease has the language you need to clarify or change all together for several topics, you may want to consider writing a lease amendment.

What is a lease amendment?

A lease amendment is a document that changes the lease itself. Suppose your lease lacks an explanation on an item, such as the collection of rent and what actions kick in if the tenant pays late. Instead of preparing an addendum to include with the lease agreement, you can instead write an amendment that gives clear direction that supersedes what the standard lease agreement says. You may find that some addenda should be permanent. If that's the case, it might make sense to engage a real estate attorney to draft a new lease that includes these items as clauses. Whether you write an addendum or choose instead to amend to your original lease agreement, all parties must sign each agreement for it to be legally binding. This ensures the tenant, landlord, and property are protected during the term of the lease.