Customized Rental Agreement

Okay. Well, thank you for joining us on this great adventure of custom-building a customized rental agreement. We've done this for owners all around the country, property managers, and it's an exciting adventure to go through together because so many people are using leases that are kind of archaic or are built by their state association, and having a customized rental agreement is going to be kind of new to them. If you're watching this video, you've downloaded ours, and hopefully you've watched through some of the preliminary videos on this page so that you can kind of get your head around some of the concepts before we actually jump into the management agreement.

So let's go ahead and get started.

Download and Customize

Some preliminary comments before we actually jump into the lease itself. Number one, you can't use our agreement. We accept the fact that our lease agreement works just right for Atlanta, for Georgia. It's all state-specific. But don't fear.

Part of our mission is to help you customize this to your model, and we'll work with you in that process as well as customize it to your state laws. So the fact that you can't use ours paragraph by paragraph is okay. Number two, download on the right-hand side with the line numbers and the space for notes. On class two, this header just on the left-hand side is a document you need to download. It's the document you and I will work off of as we're having questions and answers back and forth.

It's got some line numbers down on the left so that we can kind of jump from page to page. And on the right-hand side, it's got three inches or so of space for you to be able to take notes. So it'll be the document we'll work through over the next couple of weeks as we're customizing the lease to your model.

Pace Yourself

Thirdly, you get to go as fast as you want. We've got people that have downloaded the lease, and they're kind of new in the business. They got nothing better to do, and they can burn through all these videos in a week, and we can get on the phone and do customizing along the way. There are other managers that manage 100, 200, 500, and they're kind of up to their elbows in work every day, and they have to spread it over two to four weeks. It's okay.

You get to do this at your own pace. You get to listen to these videos while you're driving your car or while you're jogging or on the treadmill or sitting in your office. And also, you might consider letting your staff watch some of these as you go along. If you've got people in your office that you're going to want trained up on the rental agreement, this would be a great document and a great set of training videos to be able to do that. What we've had some managers do is just identify certain videos along the way that they want people in their office to watch.

So use these across the entire realm of your staff.

Consultation Available

Next, at the end of every section, we're setting aside an hour for consultation to answer questions when you're ready. Now, at the bottom of each class, there might be six or eight, 10 lessons in a class. The last bar at the end of each one of these classes invites you to fill out the email and hit submit, and we'll schedule an hour on the phone to kind of answer questions that may have come up during the video or maybe questions about how to customize this to your model. And you don't have to.

If what you have watched in the videos is perfectly clear and you're making adjustments as you need to, then you don't need to fill out that. But we're available to you, and whether you watch through one class or five classes, we invite you to fill out at the end of one of the classes when you're ready. We'll get on the phone and talk you through any of the questions that you have about the material.

Tenant Awareness

Now, a couple of reminders before we go too long. One is tenants don't know what belongs in a lease. One of the things that we see property managers do all the time is not put something in a lease because they think the tenants won't like it, or they're reluctant to put something in the lease. And I just want to remind you, tenants don't know what belongs in a lease. And some leases are six or eight pages, and some leases are 10 and 15 pages.

Some leases are put together by real estate investment trusts and their lawyers out in New York. They're kind of crazy. They go 12, 15 pages, type size six, so nobody can read it. But tenants don't know what belongs in a lease, so you get to make it up, and that doesn't mean you abuse it. We've got in the preliminary video section ideas of how you should not abuse the fact that you get to put what's in the lease because this is an adhesion contract, and we'll talk through more as we go along what that really means.

Secondly, they don't read them very carefully. One of the things that you'll notice is that tenants have a tendency to pay attention, how much is the rent, how much is the security deposit? They don't read them very carefully. So some of the fees and some of the reminders there later on in the lease are buried somewhere in the language. They don't read them, and the court doesn't kind of expect them to read it.

It's an adhesion contract, and so the enforceability of it is questionable anyway. We'll go through and address that a little more as we go along. They are adhesion contracts. Now, if you watch the preliminary videos like you should have, we spent a whole section on adhesion contracts and the problems that they occur for us in the courtroom because tenants don't read them. They're kind of boilerplate.

Tenants have to either sign them or get up and walk away. So just as a reminder, a lease is an adhesion contract, so you have to be careful of abusing it, putting things in it that are egregious and unconscionable. Next, don't go overboard. Because it's an adhesion contract, you want to be sure that you don't overboard the fines and penalties or put things in the lease that really shouldn't be there. There's lots, as we go along, we'll talk about putting language on the lease that you know is unenforceable, language that things that you're going to require that you can't track and monitor.

Fact of the matter is you load it up with all kinds of stuff that the court will call egregious or unconscionable, and that's not going to be of any help to you anyway. So as we go through this, we'll point some of those out, make sure you understand the limits of what you should put in your rental agreement. Next is a lot of this is going to be copy and paste from your landlord-tenant law. One of the things that you'll recognize along the way is with the relationship between the property manager and the owner, landlord-tenant law didn't say much about that. The legislature and the courts kind of feel like the manager is a licensed real estate professional, and they know what a lawyer is, and they know what contracts are, and they're a little more sophisticated than tenants.

And since they're building the relationship and the management agreement with the owner, they assume the owner is a wealthy real estate baron with more houses than he can live in. So he knows what a closing is, he knows what an attorney is, and as a result, the relationship between the property manager and the owner is not scrutinized very carefully by the Landlord Tenant Act or the courts. You can kind of say what you want to say. The rental agreement, however, between the landlord or the property manager and the tenant is very different, and your state landlord-tenant law has an awful lot to say about that agreement.

Rental Agreement Focus

It doesn't address much about the management agreement. It's going to address an awful lot about the rental agreement. So that's where we're going to take an awful lot from your landlord-tenant law, kind of copy and paste it into the rental agreement. What we want is when you go to court and have a debate, we want the judge to read your copy in your rental agreement and kind of say, "I've read that somewhere. Where have I heard that before?

Oh, that's exactly what the landlord-tenant law in our state says." Because that's how they're going to measure, that's what they're going to measure you up against. As the language in your rental agreement needs to be as much as we can copy and pasted out of your landlord-tenant law. Okay?

Agreement Length

Lastly, it's going to be quite a bit longer than your management agreement. We've been able, over the years, to get the management agreement down to five or six pages, including the signature page. Have a hard time doing that in the rental agreement because there are just too many moving parts. So typically, you're going to see a rental agreement up into the eight, nine pages, including a signature page. Sometimes it'll even go into 10 pages.

So don't let that surprise you. There are just more issues to deal with on the rental side.

What vs How

And then lastly, you want to put in your lease what you're going to do, not how you're going to do it. Now, we've said this on the management agreement, if you use our agreement, we've got to be careful, and what I see managers do all the time is load up the rental agreement with the how-to instead of the what. And I'll give you examples along the way. Here's one that I see quite often. I see managers say the tenant's going to pay $1,000 a month in rent, and there's a bounced check charge and maybe a late fee.

But then they go into this diatribe of the different methods that the tenant can pay rent. They talk about tenant portal, they talk about Pay Near Me, talk about ACH, they talk about cash, they talk about personal checks, and all that's operational stuff. That's the how-to. And you might want to put that in a tenant handbook, might want to offload that into a housekeeping document. But you don't want to put the how in the rental agreement.

If I'm evaluating your rental agreement, you probably notice I'll carve a lot of stuff out that is operational in nature. You don't want operational issues in a rental agreement. When you get in front of a judge and your attorney is going to defend your rental agreement, they want a short, small agreement that says what you're doing, not how you're doing it. And since operational issues change on a regular basis, you're going to want to put them in a housekeeping document or a tenant handbook because every time you go to a convention, every time you listen to a podcast, every time you watch one of our training videos, you're going to learn something and you're going to want to go back and make a change.

Well, you don't want to make changes often in your rental agreement. That is a contractualizing, and you don't want to contractualize operational issues. So we're going to make a big distinction as we go along in the lease agreement as we build it together, keeping operational issues out of the agreement. Okay? What we want to do is say what they do, not how they do it.

All right.

Rental Agreement Details

Let's get into the actual rental agreement now. So pull out that document that you downloaded with numbers down the left and white space down the right. Start making some notes. This is where we will jump into the actual agreement. First of all, your company name belongs at the top, just as it is with the Real Estate Commission and the Secretary of State.

If it's an LLC, put the LLC in there. If it's a corporation, put in a corporation. So it should say Crown Realty and Management Corporation. However, it's identified in the Secretary of State. We call it a rental agreement, not a lease agreement.

Nothing fancy about that. Call it what you want. One of the things we purpose to do is put in the year that document was created. One of the things that we struggle with over the years is to figure out when somebody signed a rental agreement or a management agreement, is we had to flip it over to the last page and see when it was executed. Well, that's okay, but it's slower and it's harder to actually do.

So we found that putting the year that this lease was renewed, updated, and executed by the tenant, we like that on the front page of the lease. You don't have to do it that way. Perfectly okay. Do it any way you like, but there's a good reason why we put that up there. We recommend you do it.

Landlord tenant addresses this agreement as hereinafter a Lease. Now, this is a label, and it's awfully important that you identify this agreement and then from now on, throughout the document, use the word lease, or if you want to use a rental agreement, whatever label you want to use, you're going to make a capital letter right there, and then you're going to use that term throughout the rest of the agreement with a capital L. Is between, and right here is going to be your company name. Should be exactly the same as it is up here.

That's item number one for you to fill in, as is this. They should both match. And that's your company name, and then here we go. We'll give it another label. hereinafter Manager.

Now, some people put the word agent, broker. We've got several training videos that suggest you do not do that. The word agent or broker has all kinds of connotations in the public's mind, in the court's mind, in attorney's mind, and what you want to do is say, "No, that's not the kind of agent we are. We're different." And if you use the word agent, most people think in terms of you make no decisions, you're a small a agent. You do what the owner instructs you to do.

You have no authority. You can't spend any money. And so you want to-- My suggestion, and Monica did a video in that we put in our preliminary training, getting rid of those words. Get rid of the word broker and agent and use the word manager because the word manager is unfamiliar to most people in the legal community, and it's not unfamiliar, but they know to read the agreement to see what authority the manager has, which is exactly what you want them to do.

You don't want them to make any presumptions as to what the agent is authorized to do. So Monica has recommended for years for me to use the word Manager, capital M, and then instead of using your company name throughout the document, you're going to use this label, Manager. And the owner or the tenant's name here, just their first name, middle initial, last name, however you want to do it, there's no science to this. Herein after Resident. And again, from now on, throughout the document, you're going to use the word Resident with a capital R.

So make sure I've covered everything. You're going to put the company name at the top. Now, some people put their logo on the document. No problem with that. It's not a good or a bad.

That's kind of an advertising thing. We didn't put it in ours because it just took up more space, and we were concerned about document creep. So for 25 years, we didn't put our logo in the top of the rental agreement. There's no reason not to. It really doesn't matter.

It's kind of your own call. We think you should put the year and pay very close attention to labels. All right? Let's move on to the next section, which is called the purpose clause. Okay?

Purpose clause. Manager leases to Resident. This is what attorneys like to do, come in a one sentence that says, here's what this document is all about, called a purpose clause.

Lease Labeling

Manager leases to Resident and Resident leases from Manager. Notice we're using capital letters for the R and the M. You're going to do it all the way through the agreement from now on. The property known as, and then you put in the property address and your state, your county and state, and then again, we're going to give it a label, hereinafter Property, under the following conditions and terms. So this is called in any contract, a purpose statement, and we think you should use property versus premises.

In most landlord tenant laws, because lawyers are lawyers, they like to use real legal terms, so they use the word premises. Now, the premises is okay. There's nothing wrong with it, except the word property is a little friendlier. If you talk to tenants and owners, they want to talk about their property. They don't want to talk about the premises.

That sounds like something that you look up in a law book. So this is not right or wrong. You do it any way you want, but in our agreement, for 25 years, we've used the term property. So again, your labels are Resident. We've got a label now of Manager.

We got a label of Property, and this is called a purpose statement. All right? Let's keep moving on then.

Defining Occupants

Now, we want to define occupants. Okay? And everybody does this a little differently, but this is the way we recommend. All adults intending to occupy the Property, see, we're using the label here with a capital P, are listed above and agree to sign this Lease. Remember, we call this a lease, not a rental agreement.

Resident warrants that the abovementioned persons, along with their minor children, shall be the only occupants in the Property except for short-term visitors. Total number of adults and minors occupying the Property shall not exceed X without written permission. Now, we've changed this over the years, and this has evolved. There's not a right or wrong. Let me make us a couple of suggestions here.

All adults are going to sign the property. That's pretty easy, and they're going to have minor children are going to be living in the property. Now, there was a time over 25 years where we actually listed the names of the children, and that isn't necessary. It's more work. It takes time.

You make errors. You misspell people's names, and some tenants don't like the idea that you have the minor children's names on the rental agreement. There's no legal reason why you would want it on there. They have no legal obligation to you under the rental agreement. So we don't recommend you list the children's names, although we did for a number of years.

We've kind of changed that over time. And the last thing is just put in the total number of adults and children. You don't have to list the children, but you can say the total number that'll be occupying the property is five. So you could say all the adults are going to sign, and their names, of course, are typed in the paragraph that we saw above. And I've lost my thought.

Sorry about that. But no other people shall occupy the property without written permission. Now, there are some property managers who try to do this. They talk about short-term occupants, okay, short-term visitors, and they say something like, "Short-term visitors can only stay for four days," or six days or eight days. And we're going to address this.

I think we did in the preliminary videos. There's an important one talking about things you put in a lease that you have no way to monitor and enforce. And whether relatives come over and, say, stay six days or 12 days or 15 days, pretty hard to monitor that. I wouldn't put that in a rental agreement for a number of different reasons. When you do, the primary one is if, when you do, you're kind of suggesting to the owner that you have a way to monitor and track it.

I don't think you do. I think over the years, we have just said visitors can stay, but the only people that are going to occupy are the five that were originally identified on the lease. So we don't think you should put that the visitors can only stay eight days. That's kind of a scam. You're hoping they might do it, but nobody pays attention to it anyway.

So we recommend that you leave it out. Okay, so listing children, let's take that out. No reason to do it. Special needs family members. Now, there are people over age 18 that wouldn't sign the rental agreement, right?

We've got a Down syndrome grandchild. He's not going to sign a lease, even though he might occupy a house along with the parents. So make sure that if there's a special needs situation, you don't ask them to sign the lease, even though they might be 20 years old. Putting limits on guest time occupying the property, I think that's kind of nonsense. We've addressed that.

I don't think you should do it. All right. Let's move on to number two. In fact, I tell you what, we're kind of at the end of this. We're going to take a little bit of a break, and we'll start number two in the next video.