The Importance of the Rental Agreement


If you do not use a rental agreement now, and you haven't had a problem, you are leading a charmed life.

A look at the different kinds of tenancies demonstrates the importance of a well-drawn rental agreement. You can get those from your apartment, landlord or rental owners association.

Three kinds of tenancies concern the landlord: Periodic Tenancy, Tenancy at Will, and Tenancy by Sufferance. Each of these tenants has some kind of rights, either under Landlord/Tenant Laws or under common law.

The Periodic Tenancy has first the right of "Possession and Control." That means that when you rent the property to a tenant they have the exclusive right to use that part which they are paying the rent on. The landlord only has rights if the tenant violates some provision of the law or some provision of the agreement with the landlord. That may seem obvious.

Questions frequently arise, however, when the premises are already occupied. A previous tenant may be staying in the property without the consent of the landlord, or a stranger may have taken possession wrongfully. Each state handles the problem a little differently.

Regardless of specifics in state law, the landlord and the tenant may each protect themselves against any doubts by express written agreements regarding a tenant who has unlawful possession or regarding any other person who wrongfully withholds possession from the tenant.

The Periodic Tenancy includes the right of "Quiet Enjoyment." That protects the tenant against disturbances of his possession of the premises. Generally, a landlord who wrongfully disturbs or interferes with the possession or enjoyment of the premises by the tenant may constitute a constructive eviction (see the February 2002 issue) of the tenant or grounds for action by the tenant against the landlord in court.

Tenancy at Will means that the property is held at the "will" of either the landlord or the tenant. These may be mutually agreed upon by the landlord and tenant. These tenancies arise by implication when someone occupies a rental unit without the permission of the landlord for an indefinite period and without any provision for paying rent.

Such a tenancy can be created when a prospective tenant moves in and occupies the unit while the landlord and tenant are negotiating to fix the terms of the lease or rental agreement. That situation is uncommon, because it can result in real grief for the landlord and free rent for the tenant.

The other case of Tenancy at Will arises when a squatter moves in and refuses to leave. A real complication here is when the landlord may have given some indication that the "tenant" could stay for a while (even one night), such as allowing a transient to sleep in the basement of an apartment house.

Tenancy at Sufferance occurs when a tenant wrongfully continues in possession after coming into possession rightfully. Often that is when a lease has expired and not been renewed. Other times it is when the tenant has been given a 30-day notice and has not left after the 30 days are up.

The important thing to remember here is that a Tenancy at Sufferance becomes a Periodic Tenancy if the landlord accepts rent from the tenant. The tenant at sufferance has absolutely no right to regard himself as a tenant--that decision is up to the landlord.

Subleases are other important reasons for a written rental agreement. In most states there is nothing in Landlord/Tenant Laws to prohibit a tenant from subletting his house or apartment. That must be spelled out in the rental agreement.

The sub-lessee does not have to pay rent or perform any of the original tenant's obligations to the landlord under the rental agreement, unless the lease specifically requires it. The original tenant has that responsibility.

The original tenant can "assign" the lease, with the permission of the landlord, which would make the new tenant liable for payment of rent. But that is another problem entirely.

Regardless, the absence of a written rental agreement prohibiting subleasing the premises could, and often does, result in a mess that ends up in court. And when the landlord goes to court he always loses, even if the court finds in his favor. He always is either out rent or has the stress of trying to get his property back under his control.

If you do not use a rental agreement now, and you haven't had a problem, you are leading a charmed life. The only thing more important to pleasant and simple management than a well-crafted, air-tight, and up-to-date rental agreement is proper tenant selection. Protect yourself.

Robert Cain, publisher of the Rental Property Reporter, has been providing solutions for the rental property industry for seventeen years. He is author of the landlord manuals Profitable Tenant Selection, Can Section 8 Work for You?, Using the Gross Monthly Rent Multiplier, the tape series “Avoiding the Tenant from Hell,” and several other booklets and manuals for landlords and property managers. In addition, he writes and produces newsletters for other companies that serve the rental property industry. He is a highly sought-after speaker, seminar leader and consultant on property management and real estate topics.

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