Rental Agreements: Clauses to consider

Important Clauses To Add To Your Lease Agreement
by Wayne Gathright

While the basic lease provisions are important, most of the time, a basic lease agreement is not enough.
In addition to incentive clauses, there are many other important clauses that landlords often tend to neglect, yet these can be invaluable if there is ever a dispute. Here are some examples of clauses that can be added to your lease agreement:

Parking. Spell out how many vehicles (cars, boats, motorcycles, etc.) you will allow to be parked at the residence? Where?

Residential Use. Can the tenants run a business? What kind?

Garage Sales/Auctions. Will you permit these? How often?

Notification of Change of Status. Require that the tenant update you on changes, for instance, employment.

Subletting. Is it allowed? How many new residents? Notification

Co-signers. Should you add another responsible party as a guarantor?

Partial Payment of Rent. What will happen if you receive only part payment?

Returned Check Fee. How are you going to handle returned checks?

Bankruptcy. What if your tenant files for bankruptcy?

Lease Violations. What are your rights? What are the tenant’s rights?

Tenant’s Absence. What if the tenant disappears? Can you get into the rental?

Furniture Lien. Can the tenant’s possessions be takes?

Increase in late fees. Can you charge additional late fees if the tenant is often late?

Judgment collection. Who pays?

Utility bills. What if the tenant defaults?

Emergency repairs. What if you have to cut off the water for repairs?

Problem neighbors. How do you handle complaints?

Disasters. What if you can’t fulfill your landlord obligations because of a disaster?

Illegal activity. Make sure you can take action against drug use, explosives, firearms, etc.

Quiet Enjoyment. You should insure that the tenant cannot intrude on other people’s rights.

Smoking. Make sure your rules are clear.

Pets. How many pets? What additional deposit? What about additional cleaning costs?

Yard Upkeep. Make sure your property looks neat and is safe.

Health and Safety Codes. Be sure your tenant doesn’t violate these.

I hope these ideas make you think about how important your tenant lease can be. With the right rental agreement design, you can create a lease that will protect your property, promote timely rent receipt, motivate your tenants, and protect your legal rights as a landlords.

Wayne Gathright is president of WG Software, Inc., developers of the Tenant File Property Management Software. He has over 30 years experience in consulting and software development for real estate. Mr. Gathright also markets a product for easy creation of leases called The Lease Designer, that allows the user to select from several prewritten leases, choose from over 200 prewritten rental clauses, and add house rules templates to the lease. A user can write their own leases and clauses, modify the existing templates, or import leases from other programs.

Guest Post: What is a Reverse Mortgage?

By Steve Stenganelli
Reverse Mortgage Basics

A reverse mortgage is a type of loan that certain eligible homeowners can get to tap into the equity in their home. Unlike traditional loans, they do not require the same sort of underwriting so no income, asset or credit checks are needed. And unlike a traditional loan, there is no monthly repayment for any amounts borrowed. Repayment of the loan’s principal and interest starts only after the homeowner dies or the home is sold.

To be eligible for such a loan, all owners on the property title need to be at least age 62.

For the most part, reverse mortgages, also referred to as RMs, are backed by the federal government through the FHA (Federal Housing Administration) that administers the program.

Myth: The Bank Keeps the House

These types of mortgages have been around for many years (since the late 1970s) and have gone through many changes.

One misconception about these types of loans is that a homeowner loses the house to the bank because of certain terms of such loans when they first came out. In the way way past, banks would take the title to the home. But that is far from the reality for these types of loans now. The property title remains with the homeowner.

How A Reverse Mortgage Limit Is Set

The amount of money that a homeowner gets is based on current age, life expectancy, and appraised value. With this information, the bank will determine the credit line or limit that the homeowner can tap. The lender will apply an interest rate to the amounts outstanding and add it to the balance owed (and subtract the interest accrued from the amount of credit line that is available). Eventually, when the homeowner dies or moves out of the home then the lender will require repayment.

The total amount that is owed is capped as a percentage of the property value which is assumed to appreciate at a certain rate during the owner’s life expectancy.

A homeowner can move out and sell the property and keep the proceeds above whatever the payoff amount is. If the homeowner dies and the property passes to his estate, his heirs can sell the property or refinance it and keep it.

The cost for such a loan can be pricey. Even with recent administrative changes reducing origination fees from the standard 2% of the loan amount, these loans can cost upwards of $12,000 for a $250,000 or $300,000 credit line amount. Although traditional credit and income underwriting are not required, all the other costs associated with a closing like title work, title insurance, recording fees, mortgage insurance and underwriting are still needed.

Why Would A Homeowner Consider A Reverse Mortgage? Comparing Some Options

Why would a homeowner opt for this? Let’s face it. Most folks would prefer not to move into an assisted living facility or a nursing home if they can avoid it. So a reverse mortgage is a good option for those who want to age in place in their home.

It provides a cash flow to help support the costs of running the house. And it taps the equity that a homeowner has built up over time that can be used to pay for essentials like medicine or home renovations to make the home safe and useful for an aging homeowner.

Yes, home equity lines or loans are also an option. They can be even cheaper certainly on the origination side since so many banks offer them with no closing costs. But the homeowner must make a payment each month even if it is just the interest only that is typically required for the first five or 10 years of the line. And if the owner doesn’t have the cash to make that payment, then there is the risk of a foreclosure.

As a former mortgage banker, I would see situations where an elder couple would call me after having refinanced the loan several times. Each time they had to incur closing costs and because their income or credit may have slipped they would only qualify for more costly loan terms that could put them at greater risk of losing the house down the road.

Downsides for A Reverse Mortgage

Setting up a reverse mortgage as a line of credit will not jeopardize Social Security benefits and is not counted as an income source for tax purposes. On the other hand, if the homeowner is receiving Medicaid, then it could be counted as an assessable asset that may limit qualification for such benefits.

Some folks who are facing bankruptcy have opted to go the reverse mortgage route. Jesse Redlener and David Burbridge, attorneys who specialize in these matters, told me of the case where a couple transferred the title from joint ownership (husband and wife) to just the wife. Then they completed the reverse mortgage process. And the husband who now owned no other property filed for bankruptcy. The courts considered this a fraudulent transfer of the property and the assets available for the credit line now became eligible to pay off the husband’s other creditors.

Get More Information From Your Planning Team

The bottom line here is that before making a serious money move you really need to bring in the professionals to help navigate through the minefield. Actions have consequences and this is an area where a good team of advisers (banker, financial planner, attorney) can help.

For more information on reverse mortgages, you may want to call Bob Irving of First Integrity Mortgage, LLC, a licensed reverse mortgage originator.

Rental Application References

Asking for references on a tenant application is important for a variety of reasons. However, collecting references is a worthless exercise unless you check the applicant out. At the very least contact the current and previous landlords. The most important reference to verify is actually the previous landlord and not the current. Sometimes the current landlord will gloss over the facts in order for the tenant to move out quickly whereby the previous landlord can be completely candid since that tenant no longer resides in an apartment they own. Ask about:

The tenant’s payment habits
Whether they follow rules
Do they respect the property
Living habits and guest that visit
Would they rent to this tenant again?

You will be surprised what you can learn in just one phone call.

Other references include friends and relatives. These references are critical to you so that you know who you can rely on in the event of an emergency or to locate the tenant once they’ve moved out. Be sure to cross check the phone numbers of references to be sure that they are from the same geographic area that the prospective tenant claims to be from.

To obtain a FREE RENTAL APPLICATION email the salem landlord

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What Massachusetts Property Owners Need to Know About Snow Removal

In light of the yesterday's " 2011 Blizzard" massive snow accumulation thought it important to clarify a property owners responsibility for snow removal. A new law took effect in July 2010, when the Supreme Judicial Court ruled in the case of Papadopoulos v. Target Corporation.

The ruling means property owners now must take reasonable care to remove all snow accumulation from their property and keep accessible areas safe to travel. Previously, Massachusetts property owners enjoyed a special exemption from liability for "natural accumulations" of snow and ice. An injured person had to demonstrate the accumulation was "unnatural," such as a snow pile created by a plow.

The ruling means snow removal is now a requirement. If a property owner fails to use reasonable care in clearing snow and ice from their property and someone is injured as a result, the property owner can be held liable. Subsequently, shovel early and often.” Additionally some cities and towns have adopted their own policies in regards to snow removal. Such as in the city of Boston , snow removal is required for the full width of the sidewalk or a minimum width of 42 inches. Throwing snow in Boston city streets is strictly prohibited. Boston residents have 6 hours after snowfall to remove snow & ice. Business owners have 3 hours to remove snow & ice, regardless if the snow and ice are caused by nature or from a city plow.

Check with your city or town to see what the “snow rule” is there.