You lease agreement can be your best protection against a lawsuit or liability on your rental property. It can also mean the different between collecting from your tenant or from paying your tenant. The goal in having a strong rental agreement is to make it as easy and obvious as possible for a court presiding over the dispute to rule in your favor, or better yet, to include terms in your agreement that deter or prevent disputes in the first place. The following are suggestions that you can incorporate into your lease agreements to maximize your protection.
1. Make the tenant responsible for reporting dangerous conditions relating to the property. In legal terms, a landlord has a duty to exercise reasonable care to eliminate conditions that could foreseeably cause injury to others. However, a landlord should only be liable if the landlord knows or has reason to know that a foreseeable risk exists. Since tenants are the landlord’s “eyes & ears” on the property, they should have the specific responsibility to inform the landlord of potentially dangerous activities or conditions so that the landlord can take reasonable corrective action. Early detection and reporting of dangerous conditions not only affords the landlord the opportunity to fix the problem before it ever becomes an issue, but if the agreement states that the tenant has a duty to report, and fails to do so, landlord can defend the claim by contending he/she was never notified, and therefore, had no knowledge of the dangerous condition. Agreements should further state that the tenant is solely responsible for any occupants or guests coming onto the property and should be clear as to the Landlord’s expectations with respect to noise, pets, or other potential nuisances or illegal activities.
2. Tenant should be responsible for immediately reporting defects or repairs, or else be responsible for any additional damages caused by failing to timely report the issue. We have seen cases where delay in reporting leaks then necessitated walls to be torn out and mold re-mediated, or delay in reporting wood rot resulted in a subsequently collapsed structure, all of which could have been avoided had the tenant raised the issue when it first became apparent. By imposing this obligation on tenants to immediately report repair items, landlord reserves a defense against all or some of the subsequent liability by shifting fault onto the tenant for additional damages caused by failing to timely report the condition. Furthermore, upon moving in, tenant should be required to affirm that he/she has examined the property and that everything is in good working order and clean, with the exception of items that the landlord and tenant specifically agree was defective. Tenant should also be required to obtain the landlord’s express consent to make any alterations or attachments to the property. Finally, tenant should be responsible for any and all defects or damages caused by their own use or actions with respect to the property (for example, broken windows or clogged drains caused by the tenant). With these affirmations along with a detailed “move in-move out condition checklist,” landlord then has written evidence that any subsequent damage or defects should be tenant’s responsibility (absent ordinary wear and tear). Shifting this burden to the tenant could very well put the tenant on the defensive later on down the line when the tenant tries to squirm out of paying for damage that was their responsibility.
3. Keep current on mandatory disclosure items. In general, federal law requires a lead based paint disclosure for all residential property built before 1978. Some states also have mandatory disclosures, for example, for registered sex offenders, smoke detectors, etc. These mandatory disclosures can be easily found by consulting with a local landlord trade association, realtor, or attorney, and can be helpful to mitigate against subsequent claims of injuries that arose from those disclosure items.
4. Collections. As with virtually any contract, an attorneys’ fee clause stating that in the event of any lawsuit or proceeding, the prevailing party shall be entitled to recover their attorneys’ fees and collection costs is highly recommended as it often provides powerful leverage against an opposing party who has or intends to break the contract. An equal or perhaps even more powerful leverage would be a notice of landlord’s right to make a negative credit report for any monetary default under the agreement. Check with the laws of your jurisdiction to determine any specific requirements to report negative history to credit reporting agencies.
Keep in mind that making your contracts stronger is not a license to act like a slumlord and our experience is that being a conscientious landlord and creating conditions that keep your tenant happy in the unit is also very effective in deterring disputes and litigation. Nevertheless, every landlord who has been around the block will inevitably experience some dispute in one form or another and our philosophy is always, hope for the best, but prepare for the worst.
