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For many real estate investors in Florida, maintaining tenant occupancy is the key to a profitable investment. But, while investors may be anxious to get renters into their properties, they need to be careful to ensure that they have sound lease agreements first. Rushing into a rental arrangement with a poorly drafted lease can lead to financial and legal nightmares, including costly tenant hold-over situations and landlord-tenant litigation.
Real Estate Investors Need Custom-Tailored Lease Agreements
With this in mind, real estate investors in Florida need to resist the temptation to use an off-the-shelf lease agreement. While several companies sell “form” lease agreements online, these generic documents rarely (if ever) provide adequate protection for investors. Instead, investors need to work with a lawyer to craft custom-tailored lease agreements that reflect their unique goals and risks, the unique nature of their properties, and the unique requirements of Florida’s landlord-tenant laws.
By way of example, here are 12 key lease terms for Florida real estate investors:
1. Identification of the Lessee (or Lessees)
Real estate investors should be sure to clearly identify the lessee (or lessees) who are renting their premises. Lease agreements should not only identify the lessee (or lessees) individually, but also make clear that these are the only individuals who have the right to occupy the leased premises.
2. Identification of the Leased Premises
Investors must also be careful to clearly identify the leased premises. This is of particular concern when renting duplexes and apartment units, but it can also come into play when investors need to retain access to a certain portion of a rented property, such as a storage shed on the premises of a single-family home.
3. Rent Amount, Adjustments and Due Dates
Lease agreements for investment properties should clearly specify the rent amount and the date on which rent is due. Investors should also include appropriate provisions for rent adjustments, whether upon renewal or in the event of a month-to-month tenancy. Even though landlords may not necessarily need a contractual right to raise the rent in these scenarios, documenting future rent increases in advance can help mitigate the risk of a dispute if a tenant claims they shouldn’t have to pay more.
4. Initial Lease Term
All real estate leases should clearly specify the initial term. As opposed to providing that the lease will last for “one year” or “twelve months,” specifying an expiration date can avoid any questions about when the tenant is required to vacate the premises.
5. Security Deposits
Real estate investors should collect an appropriate security deposit, and they should state the conditions for the return of tenants’ security deposits in their leases. Investors must also be careful to ensure that they comply with Florida’s laws governing residential security deposits, including the requirement to hold deposits in a non-interest bearing account and the requirement to provide tenants with 30 days’ written notice in the event that they intend to retain any portion of a deposit to cover repairs or other losses.
6. Landlord’s Rights
Landlords have several rights under the Florida Residential Landlord and Tenant Act. To avoid any question as to whether they are reserving these rights or have the ability to exercise them, investors should state these rights in their lease agreements. Investors will typically want to reserve various non-statutory rights as well.
7. Landlord’s Responsibilities
The Florida Residential Landlord and Tenant Act also establishes responsibilities for residential landlords. While real estate investors cannot avoid these responsibilities, they can draft their leases to make clear that they do not owe any responsibilities beyond those imposed under Florida law.
8. Tenant’s Responsibilities
In addition to the obligation to make timely payments, real estate investors should also use their lease agreements to document all other tenant responsibilities. These include (but are by no means limited to):
- Maintenance of the premises
- Compliance with pet restrictions
- Compliance with occupancy and subletting restrictions
- Notification of any issues with the rented premises that require the landlord’s attention
- Providing access to the rented premises consistent with the lease and Florida law
9. Conditions for Renewal
All real estate investors will want to clearly specify the conditions for renewal in their lease agreements. In the event that a tenant does not meet the conditions for renewal, or in the event that an investor does not wish to renew a lease for business purposes (i.e., to sell the property), it will be imperative to have clear rights to retake possession of the premises.
10. Conditions for Transfer and Subletting
Investors will also want to clearly specify the conditions for transfer and subletting. Generally speaking, investors should have the right to approve all transfers subject to their then-current requirements, and if a lease permits subletting, all sublessees should be subject to the investor’s approval as well.
11. Default, Cure, Termination and Eviction
Default, cure and termination are key lease terms that can help save real estate investors from many frustrating (and costly) situations. Real estate investors’ lease agreements should clearly identify all defaults that warrant termination, clearly specify any applicable cure periods, and clearly delineate the investor’s rights and renter’s duties upon termination. Lease agreements should address investors’ eviction rights as well—and they must do so in accordance with Florida law.
12. Legal Compliance
Investors should use their lease agreements to both confirm their legal compliance and require their tenants to maintain legal compliance throughout their lease terms. On the tenant side, this includes complying with noise ordinances and other local requirements, not bringing illegal drugs onto the leased premises, and prohibiting underage drinking and drug use on-site. While these terms won’t necessarily prevent tenants from breaking the law, they will help bolster real estate investors’ rights should they need to take responsive action.