Using a Residential Fixed-Term Lease

To create a legal relationship between you and your tenants, a fixed-term lease agreement is an option that can accomplish that objective. In this way, you'll be running your rental property operation like a business instead of just a hobby or part time venture.

The main objectives of a fixed-term lease are to establish the rules and guidelines of a tenancy, and to provide a contract for a specified period that provides housing for the tenant and income for the landlord.

If your goal is to reduce tenant turnover and create a stable income from long-term tenants, then a lease is the way to go. You can specify any length of time for the fixed-term rental period, but the standard lease term is generally twelve months.

For the lease agreement to be legally binding, certain requirements must be fulfilled. First and foremost, the agreement must comply with all state and local laws. Any part of a lease that is not in compliance with state and local laws is not enforceable. This fact makes it advisable to have your lease agreement drafted by an attorney, or reviewed by one if you already have your own lease. This may prevent problems from developing in the future.

The most common features of fixed-term leases are…

• A specific term length for the tenancy is provided. Although residential landlords are free to specify tenancy lengths, the most common fixed-terms are one-year periods.
• Once the lease agreement is binding (enforceable), neither the landlord nor tenant can change its terms. Changes can only be made during the term of the lease if both parties agree to the change(s).
• The fixed-term of the lease locks the tenant into the tenancy for the length of the term. This provides for greater income security for the landlord.

Remember, the satisfactory performance of any contract, whether it be a lease, mortgage, car loan, etc, is dependent upon the quality and integrity of the person signing the contract. That’s why it's important to screen tenant applicants thoroughly before having them sign a lease agreement and renting to them.

For more in-depth information about lease agreements, please visit The Landlord's Library book collection. It's the ultimate, one-stop source for practical, comprehensive information on the entire subject of residential landlording.

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