The Write Stuff: Establishing an “Agreement to Rent” in Sonoma County – Part 1

Windsor Property Management - Dede's Property ManagementFor 40 years, DeDe’s Rentals has been Santa Rosa’s premier property management agency. Over the course of four decades, we have developed processes and documents to help establish a relationship that benefits both tenants and property owners.  The foundation of any landlord/tenant relationship is the agreement to rent. An “agreement to rent” is primarily a business decision, but for a multitude of reasons, it should also be a written contract.

Tenancy CAN be created without a written agreement, simply by mutual consent and the initial acceptance of rent. However, in the absence of a written contract, the only enforceable obligations are those that can be proven. Without something in writing, how can you prove ANYTHING? Even the collection of rent can be problematic: Lacking a written contract, rent is considered due at the END of the month, not the beginning. The rent would not be considered late until it is 30+ days in arrears.

For that reason alone, the professional landlord should insist on a written rental contract. (As an aside: if you either OWN or MANAGE residential rental property, you should at all times consider yourself among the ranks of “professional landlords,” and educate yourself accordingly. Welcome to the club.)
Put it in writing.

While the word “lease” is frequently used to describe any rental contract, the term more accurately describes a specific type of agreement. A lease establishes tenancy for a fixed period of time, i.e. a “one year lease,” as opposed to tenancy on a  month-to-month basis. Whichever you choose, the term of tenancy should be clearly documented.

There are a variety of templates available to create a solid rental contract. Nolo Press, National Association of Realtors, your state’s Apartment Association, TrueForms/Professional Publishing… The choices are extensive. Unless you have a great deal of experience, we do not recommend that you attempt to create a rental contract “from scratch.” The professionals at DeDe’s Rentals in Santa Rosa know that terms and conditions in our own contracts often have to be expanded or revised, due to changing circumstances and regulations. Whenever we consider a revision to our own contract template, it is considered and reviewed by one of our attorneys first, to make sure that it is properly written, legal and enforceable. Furthermore, no matter how extensive your experience or how knowledgeable you may be, it’s important that you do not “slip over the line:” certain procedures are best performed by a lawyer, and if you do them yourself, there is a possibility that you are “practicing law without a license”. If you don’t have ready access to a lawyer, be wary about making significant alterations or revisions to a pre-formatted document. Instead, you should typically “fill in the blanks.”

It’s always important to pay attention to details, even when completing a pre-formatted rental contract. If errors are made in the construction of a contract, it could make the contract difficult to enforce. It’s been said, “With great power comes great responsibility.” Make sure your facts and intentions are accurately and clearly documented, or your authority could be undermined.

As a Sonoma County Property Management company, DeDe’s Rentals has significant experience creating and implementing the California Residential Lease Agreement. We’d like to submit for your consideration a few basic contract clauses and details that can pose unexpected hazards, or alternately, that can simplify the ongoing landlord/tenant relationship.

  • Leased property address and location: Define the property address precisely and accurately. For example, if you mistakenly identify the rental unit as “123 Main Street,” when it’s actually “123 Main Court,” it could complicate an unlawful detainer process. Check your facts.
  • “Open book accounting:” This is a financial concept, wherein payments are applied to the oldest obligations first. For example, if a repair at the rental property is considered to be the tenant’s responsibility, you must notify the tenant (in writing) that the invoice is due. If, when rent next comes due, the tenant fails to pay the repair bill and ONLY pays the rent, you can legally apply funds received to the repair bill FIRST – because it is the older obligation. This will ultimately simplify your bookkeeping.
  • Late fees and grace periods: we encourage using a percentage of rent as a late fee, rather than a daily amount. (In a perfect world, we would never even have to collect late fees, because we actually prefer that tenants pay rent on time.) Be cautious about the percentage charged: excessive amounts could be considered “usury.” Our attorney recommends capping the late fee at 6% of unpaid rent. Also in regard to late payments: your contract should state that rent is due on the first of the month, and delinquent if not received on that date. Collect late payment obligations when they accrue, applying the open book financial method referenced above. Do not keep a separate ledger to track late fees and wait to deduct them from the security deposit at move-out; that strategy could backfire.
  • Identify the number and names of residents: In most areas of California, anyone 18 or older living on premises automatically has the full rights of tenancy; by identifying each adult as a named tenant, you also make them jointly responsible for the obligations of tenancy. (Please note: in certain locations, like San Francisco, we realize this is NOT a practical strategy.) In addition to naming all adults as tenants, we identify each underaged co-occupant by name, specifying that ONLY these tenants and co-occupants are permitted to reside at the premises. The contract should disallow assignment, subletting or alteration in occupants without the written permission of lessor. By taking these measures, you will minimize the likelihood of unauthorized, illegal subtenants taking up residence in your rental property.

Between the contract itself and the various disclosures required, DeDe’s Rentals’ contracts now run in excess of eleven pages. There are MANY contract provisions included in our rental package, far too many to address in one article. As a landlord, one of the best ways to protect yourself and get your own landlord/tenant relationship off “on the right foot” is to work with a professional property manager. For contract creation and execution, we know how to do it the “write” way!  If you have any questions please feel free to contact us at DeDe’s Rentals. We will be happy to help you.

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