Writing a rental agreement or lease

A good rental contract may help protect you and your investment

As a landlord, your job doesn't stop after you've written the rental ad, screened applicants and rented or leased a property to a tenant. Keeping a good relationship with your tenant while they're leasing your property begins with a solid rental or lease contract. A good contract may help protect you and your tenant.

How to write a rental agreement

Generally, rental contracts are month-to-month agreements and leases are for a fixed period of time. The starting point for either agreement should list the time period and also important financial information such as:

  • What the rent amount is and when it is due.
  • When late fees will be charged.
  • What fees will be charged, if any, for returned checks.
  • Who is responsible for paying the utility bills.
  • What deposits are needed and under what circumstances are they refunded.

In addition, you can protect yourself from unexpected costs by making sure your contract:

  • Specifies what can and can't be changed in the dwelling, such as painting, hanging pictures, etc.
  • Spells out the difference between normal wear-and-tear and damage.
  • Explains whether renters insurance is required.
  • Defines the property premises as well as any common areas.
  • Defines the role of tenant in notifying you of any damages.
  • Explains the owner's rights to enter and inspect the property and how much notice will be given.

Once you've covered the basics of the contract you can include optional language detailing any additional items you want. Each individual property is different so spend some time thinking about how a potential tenant might use it. Some questions to consider are:

  • Are pets allowed?
  • If there is a yard, who is in charge of maintaining it?
  • Can the tenant have guests? If so, how many?
  • How many keys will you give out?
  • Can the tenant park on the premises? If so, where and how many vehicles?
  • Are there any laws specific to your area that need to be followed, such as noise ordinances, leaf pick-up rules or snow removal laws?
  • If there are multiple people signing the contract, who is the primary tenant?

These questions are not a complete list, so put some effort into thinking of any circumstances that may arise so that you can be sure you're protected by your contract.

In addition to any extra language that's needed, you need to make sure any contract includes the names of all the tenants. Also include who the tenant should contact as well as the contact phone number or email information.

Putting it all together

Once you've written out all the terms of your contract you can put it into a contract form by either using an online template or contacting a real estate attorney to help you draft the contract. A real estate attorney is the safe choice to make sure your contract follows local laws and will be legally binding.

A good contract is a solid starting point to any landlord/tenant relationship, but you should also know what common landlord mistakes to avoid and what landlord responsibilities you have. You should also talk to a State Farm® agent to make sure your coverages are adequate for a rental property.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Neither State Farm® nor its agents provide tax or legal advice.

State Farm Fire and Casualty Company
Bloomington, IL

State Farm General Insurance Company
Bloomington, IL

State Farm Florida Insurance Company
Winter Haven, FL

State Farm Lloyds
Richardson, TX

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