When you own a property and lease it out to commercial or residential tenants, you need a written lease governing the relationship. Here are five of the most critical clauses that your lease should address.
Clause #1: Rent Payment Terms and Late Fees
A commercial or residential lease should clearly define rental payments for tenants, including base rent amounts, rent escalation (for commercial leases), due dates, payment methods, and additional charges, such as utilities, property taxes, or common area maintenance charges. It should also outline your rights and the tenant’s obligations in the event of late rent payments. State landlord-tenant and contract laws require that leases clearly outline applicable late fees.
Having clear and comprehensive rental payment terms can help reduce confusion for tenants regarding the amount they owe each rental payment period and encourage them to pay on time, which can improve your cash flow.
Clause #2: Security Deposit Conditions
Residential leases should also address security deposit requirements for tenants. Florida law requires landlords to follow strict rules for handling tenants’ security deposits. They must keep the money in a separate account at a Florida bank. The account can either be non-interest-bearing or interest-bearing. If it earns interest, the tenant must receive at least 75 percent of the average annual interest or interest at a yearly rate of 5 percent. The landlord must also give the tenant written notice with the bank’s name and address and explain whether the tenant will receive interest on the deposit.
The lease should also outline the conditions under which you, as the landlord, may deduct money from the security deposit, as permitted by state law. Florida requires landlords to return security deposits within 15 days of the termination of the tenancy, unless the landlord intends to make a claim against the security deposit. In such cases, the landlord has 30 days to provide the tenant with notice of their claim.
Outlining the handling of security deposits will ensure that you hold tenants’ money as required by state law, which can help prevent legal disputes and potential financial liability.
Clause #3: Maintenance and Repair Responsibilities
Leases should also expressly delegate maintenance and repair responsibilities between landlords and tenants. In residential leases, state law requires landlords to comply with building, housing, and health codes to keep leased property in a habitable condition. For commercial leases, landlords can delegate more extensive maintenance and repair responsibilities to business tenants. However, landlords of residential properties should obligate tenants to perform routine cleaning and trash disposal to maintain their premises in a well-maintained condition.
Leases can also outline procedures under which tenants can request repairs that fall under the landlord’s responsibility, and how the landlord will handle emergencies (e.g., granting the landlord the right to enter without advance notice to address emergency repairs, such as electrical hazards or broken/overflowing pipes).
Clause #4: Rules for Property Use and Occupancy
A lease can impose conditions or restrictions on a tenant’s use or occupancy of their premises. For example, leases can restrict tenants’ rights to sublease or to allow unauthorized occupants. Commercial leases can also limit what kinds of business a tenant may carry on to ensure the property complies with zoning and land use laws and to avoid breaches of the landlord’s exclusive use agreements with other tenants. Residential leases may include restrictions on pets, smoking, or conducting commercial activities on the property (other than use of the premises for remote working).
Clause #5: Lease Termination and Renewal Options
Finally, leases should have an end date and include grounds under which the landlord may terminate the lease. The lease can also include procedures for the tenant to terminate early, which may require providing advance notice and paying a termination fee. Leases may also address renewal procedures.
Contact a Real Estate Attorney
When you own income property, having a comprehensive, well-drafted lease can protect your investment and financial interests. Contact the Law Offices of Jeffrey A. Herzog, P.A., today for an initial consultation with a real estate lawyer to learn more about the essential issues you should address in your leases with your tenants.