Why NOT to use free online lease forms
October 1, 2009
I almost couldn’t believe what I was reading. Ever since the first issue of the Rental Property Reporter some 16 years ago, we have been warning against using boilerplate leases and rental agreements. They often have violations of a state’s Landlord-Tenant Act and can result in a tenant getting to stay up to three months rent free. Instead, landlords are best served by getting leases and rental agreements from their local landlord, rental owners or apartment associations, or from real estate attorneys knowledgeable in landlord-tenant law. Those forms are written for the state in which the landlord owns or manages property and updated with every legislative change.
I had warned about bad leases, but I didn’t realize how bad a lease agreement could be until I typed “free lease agreement” into Google and came up with a lease from Total Real Estate Solutions.
I read the lease and found 29 clauses in the lease’s four pages that could result in a tenant being allowed to stay rent free or to successfully get a money judgment against a landlord. In just four pages, this lease agreement managed to endanger the bank account and property of any rental owner stupid or cheap enough to use this lease as a contract to rent his or her property. In addition, I found numerous spelling, grammatical and usage errors that could be construed as either ambiguous or unclear and result in a tenant-friendly judge ruling against a landlord.
I will not reproduce the entire document here, nor will I deal with each of the errors but only with the most egregious parts that show how a “free” lease form can be anything but.
It begins in paragraph one.
The Tenant is required to give the Landlord in writing a notice 1 month (30 days) in advance of his/her moving. Notice must be given on the first day of a month. If notice is given after the first day of the month, the 1 month (30 day) notice will not start until the following month. (The notice must be one full calendar month starting on the first day of a month.) Rent may be increased at any time after first year and the “securite” [spelling intentional] deposit cannot be used for rent.
Notice first that the paragraph claims that a month is 30 days then changes the definition to one full calendar month late in the paragraph. Worse than that, though, notice requirements vary from state to state. Some are as little as seven days and some as long as 60 days. While you can make a lease more liberal than state law, you cannot make it more restrictive. So while you may give a tenant more time than the law allows for notices, you may not make give him or her less. Using this lease agreement flies in the face of many state laws in the first paragraph.
Also note that there is something called a “securite” deposit. Presumably, that is a “security” deposit. But would a tenant-friendly, landlord-hating judge agree?
Paragraph two has equally egregious problems.
Tenant shall pay as rent the sum of $ ____________ per month, due and payable monthly, in advance, no later than 5:00 p.m. by the forth day of every month. Tenant further agrees to pay a late charge of $___________ for each day rent is not received after the forth of the month to the Landlord regardless of the cause, including dishonored checks, time being of the essence. An additional Service Charge of $_____________ will be paid to Landlord for all dishonored checks.
I don’t know when the “forth” day of the month is, but I suspect the author of this travesty meant “fourth.” However, even assuming that is the case, state laws differ as to when rent is considered late and a late fee may be assessed, some more favorable to landlords, some less favorable. Landlords do not have option of abrogating state law in their favor in a residential lease. Attempting to collect a late fee or charge before state law allows it is considered an unconscionable clause and not enforceable; the tenant might end up not only owing no late fee but no rent for two months.
Also notice the language about a service charge for “all dishonored checks.” Presumably the author of this landlord-unfriendly document meant “each dishonored check.” Saying “all dishonored checks” could be construed as requiring a service charge to be paid only once and have it cover any and all bad checks a tenant might write—ever!
Paragraph four is an invitation to a Fair Housing suit.
Tenant agrees to use said dwelling as living quarters only for ________ adults and ________children, namely:______ and to pay $50.00 each month for each other person who shall occupy the premises in any capacity.
This paragraph could bring the instant attention from the Fair Housing enforcers. As landlords, we may only limit the total number of occupants to a dwelling, not adults and children separately. Then there is the provision requiring each “other person” occupying the premises to pay an additional $50 per month. The word “other” is subject to multiple interpretations. The word “additional” would have been far more precise and appropriate.
One of the most unbelievable paragraphs contains the following language: “All pets on the property not registered under this Lease shall be presumed to be strays and will be disposed of by the appropriate agency as prescribed by law.” Wow! Here’s a landlord promising to steal or cause to be stolen a tenant’s personal property. I can see lawyers awash with expectant glee at the potential lawsuits.
Paragraph 10 implies that a landlord may collect damages from the security deposit only at move out, when it states “Tenant specifically authorizes Landlord to deduct amounts of any unpaid bills from the Security deposit upon termination of this Agreement.”
Under normal circumstances, damages and other amounts owed a landlord can be deducted at any time the tenant owes the money but doesn’t pay up. At that point, the tenant is required to put that amount of money back into the security deposit. By using this agreement, a landlord is depriving him or herself the option of keeping all amounts owed by a tenant current. Imagine what would happen if a tenancy lasted five years and a tenant had failed to reimburse a landlord for damages for damage that occurred in the first year. That means a tenant has had free use of the money for most of the tenancy.
Another unbelievably egregious paragraph is number 12, which states:
Any removal of Landlord’s property without express written permission from the Landlord shall constitute abandonment and surrender of the premises and termination by the resident of this Agreement. Landlord may take immediate possession, exclude Tenant from property and store all Tenant’s possessions at Tenant’s expense pending reimbursement in full for Landlord’s loss and damages.
So if a tenant removes a broken range from his or her unit, the landlord can call that “abandonment or surrender of the premises?” One state law defines “abandonment” as follows:
In this section “abandonment” means either the absence of the tenant from the dwelling unit, without notice to the landlord for at least seven days, if rent for the dwelling unit is outstanding and unpaid for ten days and there is no reasonable evidence other than the presence of the tenant’s personal property that the tenant is occupying the residence or the absence of the tenant for at least five days, if the rent for the dwelling unit is outstanding and unpaid for five days and none of the tenant’s personal property is in the dwelling unit. (Arizona)
Another state law reads:
The premises shall be deemed abandoned if:
(1) The landlord has a reasonable belief that the tenant has vacated the premises and intends not to return;
(2) The rent is due and has been unpaid for thirty days; and
(3) The landlord posts written notice on the premises and mails to the last known address of the tenant (Missouri)
Many other state laws are remarkably similar. Not only are lawyers awash with expectant glee but also salivating at the prospect of sticking some unsuspecting landlord with a huge damage suit.
Paragraph 15F could result in a landlord not being able to keep any part of the security deposit. It states:
Within thirty (30) days after termination of the occupancy, the Landlord will mail the balance of the deposit to the address provided by Tenant in the names of all signatories hereto; or at the Option of the Landlord will impose a claim on the deposit and so notify the Tenant.
Fourteen states require that the security deposit be refunded or accounted for in less than 30 days. So if a landlord were to use this form in one of those states, he could well end up having to pay the tenant all of the security deposit regardless of the amount of damage or unpaid rent the tenant left owing.
The absolute worst paragraph in this “free” lease agreement is paragraph 16. This one will result in a landlord losing an eviction.
The acceptance by Landlord of partial payments of rent due shall not, under any circumstances, constitute a waiver of Landlord, nor affect any notice or legal proceeding in unlawful detainer theretofore given or commenced under state law. Acceptance of partial rent due or late payments does not create a custom nor constitute a continuing waiver of the obligation to pay on time. No payment by the tenant or receipt by the landlord of any amount of the monthly rent herein stipulated shall be deemed to be other than on account of the stipulated rent, nor shall any endorsement on any check or any letter accompanying such payment of rent be deemed an accord and satisfaction, but the landlord may accept such a partial payment without prejudice to his rights to collect the balance of such rent.
This paragraph says that if a landlord accepts partial rent after an eviction has been filed it doesn’t matter, the eviction goes forward. That is a direct violation of public policy and an unconscionable clause. If a landlord accepts partial rent under those circumstances, the tenant will get to stay rent free up to three months even if the landlord is lucky enough to draw a landlord-friendly judge. Remember, the eviction was for non-payment of rent in a specific amount. Once that amount changes, the eviction complaint is null and void because it doesn’t reflect the actual amount owed.
As I point out in the landlord manual Evictions: How to win (or lose) them:
The old axiom “Never turn down money” doesn’t work for you in this situation, it works for the nonpaying tenant.
Once you start the eviction process— file the complaint in court—do not accept partial rent payment. Lots of times the financially-strapped tenant will come to you and say he will have all the money in two weeks, but he can give you $100 now.
Twenty-seven states have specific requirements for access varying from “reasonable notice” to two days. Whether or not the rent is late is immaterial.
If you accept that money, you have effectively stopped the eviction process. Virtually every state’s Landlord Tenant Law spells out that by accepting partial rent payments after an eviction has begun you waive your right to proceed with the eviction.
Paragraph 22F provides that the tenant must “Allow the Landlord or his agent access to the premises for the purpose of inspection, repairs, or to show the property to someone else at reasonable hours, and to specifically authorize unannounced access anytime rent is late.”
Twenty seven states have specific requirements for access varying from “reasonable notice” to two days. Whether or not the rent is late is immaterial. The tenant has the right to occupy the premises until his or her right is taken away by a judge or he or she moves out and abandons and/or surrenders the premises.
Paragraph 39 provides that notices be sent by Certified Mail. Some states have specific notice requirements that state a notice may not be delivered by Certified Mail. Any notice sent by that means is not considered to be delivered.
Those are not all the errors in this “free” lease agreement. But even if they were all, those alone would be enough to rush right down to your local apartment, rental owners or landlord association, join the association and get a legal form.
Rental property ownership and management is a business. Businesses, if they are to stay in business, need to be constantly conscious of situations that could result in their becoming legally liable or financially at risk. While we wouldn’t dream of buying or selling a property without an airtight contract, many landlords are only too willing to turn over their rental properties with a completely ineffectual or patently illegal lease or rental agreement.
The most common way landlords lose evictions is bad form and bad service. Downloading a free lease agreement from the internet flies in the face of good sense. It may be free now, but it will be extremely costly the first time a landlord tries to get rid of a bad tenant.