You’re probably here because you want to learn everything you can about leasing rental property. Nobody knows everything there is to know about being a Landlord. I certainly won’t ever make that claim, but I can give you access to over a decade of my own experience with residential and commercial leases, foreclosures, squatters, deposit disputes, repair claims, Eviction Courts, Appeals, and much more.
I’m also the Administrator of a growing social networking community known as Texas Landlords. Look us up on Facebook. Our combined experience creates an unmatched potential of knowledge. I pick up new information about activity in Courts around the state all the time. You can be a part of it too.
If you are open to learn everything you can about leasing rental property, whether you have zero experience or 50 years of it, I welcome you to read on.
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Put it in Writing
The Hassle-Free Renting process starts out with a good lease. While in Texas and other states it is legal to have a completely oral agreement with a tenant, that’s not something we advise. You should have a written lease which clearly delineates the obligations and the rights of the tenant, but also the obligations and the rights of the Landlord. Most Landlords start out with a written lease, but many don’t know where to get one.
Where Can I Find a Good Lease?
Some new Landlords will go online and simply do a search for a residential lease and will use something that’s more appropriate for a tenant that resides in a different state. Sometimes people will use an outdated lease. Sometimes people will use documents that were not intended for residential leases at all, or they’ll use a residential lease for a commercial purpose.
If you are unsure about t
he quality of the lease that you’re using or whether or not that lease is appropriate for renting a unit out in present date Texas for use under the Texas Property Code as it is currently written, consult an attorney. You can also reach out to a licensed realtor. A licensed realtor may have access to many forms you can use, including the Texas Realtors Residential Lease seen here.
You need a lease that has stood the test of time, one that has survived numerous challenges in court, and one that is appropriately aligned with the current requirements of the Texas Property Code. If you show up to Court with a bad Lease, a good attorney for the defendant can knock it down and create more delay, more headache and additionally create costs that you can prevent by starting off with a proper Lease.
Read it!
This really should go without saying, but most Landlords have never actually read their own Leases. This is a bad business practice. If you want to thrive in this business, you must be aware of the most important documents to your business.
And don’t stop simply because you don’t understand your Lease. In fact, read your lease with a highlighter and go find a good Landlord/Tenant attorney who can explain those complicated provisions to you in plain English. Also, don’t trim out provisions that you don’t understand. That could be very harmful to you. If you need help, especially if you’re new to this, get a mentor, find an experienced realtor, or pick a knowledgeable attorney.
Who is the Actual Landlord?
One of the things that I found representing tenants over the course of my time as a real estate attorney is so many times the lease itself has imperfections. These problems are very easy to correct if you know what you are looking for.
For example, if you own property under the name of a holding company – let’s say, 123 Holding, LLC – but you use a different name as the landlord. Perhaps you use your own name as the personal owner. You’ve just created a fact issue that the court can entertain as the basis to deny you possession in an eviction lawsuit. Be careful and make sure that the parties to your Lease Agreement are correctly listed on the lease. This way, when you file an eviction, it’s very easy to tell that the person requesting possession is the person entitled to possession.
Who are the Tenants and who are Mere Occupants?
This question doesn’t seem like a big deal at first, but you can run into a lot of complications based on who you do or do not include in a Lease and who is required to sign that Lease. Everyone who will reside (even just part-time) should be identified on the Lease as either a Tenant or an Occupant.
The Tenant(s) should be every adult who is occupying the premises. Not only should these adults sign the Lease, they should be required to submit to the application process. That means a criminal background check, rental history review, and credit report. If grandma isn’t going to live on the property, why is she the only one signing the Lease? You have to be the one who determines who signs. Don’t let bad tenants hide behind someone’s good credit, criminal, or rental history.
An “Occupant” should be a minor child or a disabled adult. These are also important disclosures, particularly if you run into instances of unauthorized occupants suddenly on the premises. A family of four might mysteriously become two families with additional children and adults suddenly residing in the home. If an unnamed occupant violates the lease or causes damage to the property, you may be able to seek compensation from the named party on the Lease, but that unknown party is left without consequence because you have no idea who that person is. The Lease should state that such occupancy is a violation of the Lease and immediately subjects the Tenant to eviction.
What Information do I need in an Application?
When a prospective tenant fills out an application, you will likely want to know the following:
- Name
- Current address, length of time there, phone number of Landlord
- Current Employer, length of time there, phone number for supervisor
- State Issued ID
- Social Security Number
- Rental history for past five years
- Names and ages of all children living on the premises
- Names and ages of all other adults living on the premises
- Vehicles
- Pets
Remember that you will need to have all adults living on the premises submit a separate application. You will want to review each adult’s rental, criminal, and credit histories.
The application step will deter some tenants. That is the first sign of a bad tenant. Let them walk away. Every bad tenant will have a sad story, an excuse, or an explanation for a poor report. Trust the documentation over a story.
Keep a Hard Copy of the Signed Lease, and Make a Copy for your Tenant(s)
Always, always, always maintain original signed copies. It’s not often that it happens, but I’ve seen landlords who lose their copies of a signed lease or, for whatever reason, allow the tenant to keep the original signed copy. While this seems like a basic note, it’s important to keep both a paper original, but also a digital copy.
It is not difficult to make digital copies at home on your own equipment. However, if you lack the tools or the know how, you’re encouraged to go to a local business that might provide this service to simply keep a digital copy of your lease and application data on your email or in a digital file that you hold.
What Terms are Required in a Lease?
Naturally, you will want to establish the amount of rent, the length of the rental term, whether or not pets are allowed, etc. But are there other things that may not come to mind, especially if you have never leased residential property before?
You want to make sure that the language in your lease comports with Texas law. That could be as easy as presenting a copy of what you have now or what you plan to present to future tenants to a licensed attorney. A licensed attorney can take a look at what you have assure you that what you have still comports with the law.
There are a number of times where I’ve seen landlords come in with a very basic lease that does not properly inform tenants. When I represented tenants in the past, I would attack leases like this as ineffective and illegal. While it doesn’t always win the day, it can buy time for a defendant who is seeking just that – additional time where your highest and best use of the property is a tenant who is paying rent and who is following the law.
Remember, it’s also the obligation of the landlord to follow the law. The Texas Property Code, Chapter 92, explains the requirements for residential leasing. Among these requirements is the obligation of the Landlord to inform the Tenant of specific repair rights and remedies. If you Lease is silent in this respect, you might find yourself in legal jeopardy if a Tenant files a claim for repairs against you based the condition of the premises and on your defective lease.
Are you subject to certain limitations because your home is part of a Homeowners Association? If so, you must inform your tenant of these rules, regulation, limitations, and requirements in writing. Don’t expect your Tenant to simply know how often your HOA requires you (the owner) to water your lawn. Are you leasing in a community? You might have common space and rules regarding noise, parking, pets, etc. These stipulations must be made clear and should be in writing for them to be enforceable.
What About the Most Important Part—the Rent?
It is absolutely necessary to keep accurate accounting, particularly if you’re collecting cash payments. If you’re collecting cash payments from a tenant, you’ll need to keep an accurate ledger with all payments. Chapter 92 of the Texas Property Code requires that receipts be provided and that a ledger be maintained, particularly when cash payments are taken.
In an Eviction Trial, if you hope to prove default by non-payment of rent from a tenant, it’s necessary for you to be able to display to the court an accurate means of accounting for each payment received and any fees assessed against the tenant. Cash payments are difficult to prove. Your Lease may require payment by money order, check, or by some electronic means. Each of these is much easier to prove before a judge, should the need arise.
Late Fees
Most Leases have a provision for late fees. If yours doesn’t, don’t just assume that a “Standard Late Fee” exists in the law. It doesn’t. I am surprised by how many Landlords continually waive late fees for habitually late tenants. This is not a good practice. You might do this once a calendar year, but you can spare yourself the headache by simply enforcing the fee. Eventually, they’ll pay on time, leave, or be evicted. The best tenants rarely repeat late payments, and the worst ones will continually pay late, especially if they are allowed to do it for free.
When I Take a Payment, What Gets Paid First?
I’d like to also mention one common mistake that landlords make with regard to the application of funds. It’s necessary to have good accounting of the amount of money that’s coming in, but it’s also a good rule of thumb to apply any payment that is received to the longest standing debt.
Too many times, Landlords come into my office stating they received payments from a tenant in month three when the tenants is three months behind and, for whatever reason, the Landlord has applied the rent to month three as opposed to month one, which is the first month of delinquency.
You’re encouraged to always apply any amounts received to the oldest debt, including fees. You’ll want to read your lease to make sure that the ability to apply funds this way is locked in the black and white of your Lease. This way you can collect an optimal amount of income based on what the tenant actually owes. You want to avoid the position in front of a court where certain months that you claim have been unpaid or remain unpaid are actually miscalculated because of a bad account ledger.
When do I Hand Over the Key?
Do NOT hand over the keys until you can answer each question in the affirmative:
- Have I run a Criminal, Rental, and Credit check on every adult Tenant seeking to live on the premises?
- Have all of these reports come back positive for each adult?
- Has every adult Tenant signed the Lease?
- Has the Deposit been paid in certified funds (money order, electronic transfer, or cashier’s check)?
- Has the first month’s rent been paid in certified funds (money order, electronic transfer, or cashier’s check)?
- Have I clearly informed the Tenants of additional rules, restrictions, or requirements regarding conduct and maintenance of the premises?
If your answer to each question is, “Yes,” then you’re on your way to a Hassle-Free start. Is there more to learn? Yes. Tons.
For more Landlord Resources, click HERE.