As more and more people start to rent out second properties for vacation rentals as demand increases, it’s extremely important for those new to the industry to know exactly what needs to go into their short-term rental agreements with tenants. It’s vital to be specific and thorough so that the owner protects both themselves, and their property. The rental agreement is a legal contract that provides the rules the owner and the tenant(s) agree to follow.
How to Create a Rental Agreement: A Step by Step Guide Highlighting What to Include
- The owner should create a title for their short-term rental agreement contract that sits at the top and explains what the document is so that the tenant understands exactly what they’re looking at.
- Include a description of the property being rented and what the rental includes. Simply put the address of the property as well as amenities and furnishings that the rental comes with.
- Name all of the tenants as well as the date the contract should be signed. It’s important to name every adult that is planning to live in the property that the owner is renting out. This way all tenants are legally responsible to respect all terms of the agreement, which includes the amount of rent that is due. Also, all tenants are responsible if one tenant violates a term in the agreement.
- State the limits on occupancy of the property. The agreement needs to show that the unit is only for the tenants who have signed the contract as well as their children, who are minors. This way the property is limited to people that the owner has approved to live on their property and doesn’t allow the tenant to give others (friends, family members, sub leasers) the right to live on the property without the owner’s knowledge or permission.
- State the period of the rental that specifies the date and time that the tenant is allowed on the property and the date and time that the tenant is to vacate the property.
- Rent. The rental agreement must specify the expenses of rent, the date or time it’s due, and how the owner should be paid whether it’s cash, check, credit card, etc. The agreement should also stipulate whether there would be late fee charges if rent were not paid at the correct time stated and the amount that the owner will charge. It’s important to be very specific so that there is no hassle or confusion for the tenant on how to pay or where to send the money due.
- Security deposits. A security deposit is an amount of money that the tenant puts down before the beginning of the rental in case of accidental damage to the property. The tenant receives their security deposit back if everything is in order at the end on their rental period. The owner must be specific in stating the dollar amount of the security deposit (check state laws for maximum security deposit amounts to avoid any legal hassle) and how the owner can use the security deposit in case of damage. The owner must also state in the agreement how and when the deposit will be refunded after the duration of the rental period.
- Make a clear cancellation policy. If a tenant decides to cancel a reservation it can mean that the owner’s property will not be in use for the time that was allotted and potential earnings can be lost at least until the owner can find another tenant. The owner should make a policy stating how many days in advance a tenant can cancel their reservation before they will be charged or not refunded any money put down for the reservation.
- State obligations of the tenant and prohibited behaviors on the owner’s property. It’s very smart to add rules and to note specific activities that are restricted while a tenant uses the owner’s property. This can include rules on pets whether they’re allowed or not, rules on smoking, rules on how many occupants are allowed in the house (to avoid large parties or excessive noise) and prohibiting illegal activities such as drug use on the property.
The owner should also make sure that the rental agreement includes and observes laws and ordinances including health safety codes and requirements and anti-discrimination laws. The owner should make sure that important state laws regarding rental properties are included to make the tenant aware and protect the owner from any legal aggravation with the property being rented.
- Outline the owner’s rights to check on and evaluate the property for damages or maintenance during the stay of the tenant. The tenant should be aware if the owner has the right to enter the property during their stay and the owner should stipulate advance notice he or she may give to the tenant. This is typically not as important or relevant for short-term rental agreements, but if the owner plans to be around the property at all, it should be included in the contract.
- Describe how the property should be left in good condition before vacated by the tenant. The owner should specifically define the condition that the property should be left in and how the tenants should clean up after themselves in order to avoid hassle or disagreement after the fact.
- Include a signature block at the end of the agreement for each tenant to print and sign their names along with the owner’s signature agreeing to the contract set forth.
It’s important for homeowners to be as specific as possible when making this short-term rental agreement contract to protect themselves and their property as much as possible. Tenants should be given clear instructions on rules that come along with living on the property and obligations that they have. It’s always better to be as clear as possible so that there is no confusion between the parties.
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