What to Include to Strengthen a Lease

In Minnesota, and elsewhere, leases are standard contracts, but they need to be well written to protect you and your tenants.

Rather than using a pre-printed boiler plate lease, consider including provisions that cover these critical areas:

Cancellation

This is the single most important provision in a corporate or residential real-estate lease. Tenants prefer leases they can cancel while you, as a landlord, likely prefer the guaranteed steady revenue stream delivered by a lease that cannot be broken. Fortunately there are clauses your attorney can craft that will protect you and mitigate the risk of having to go to court if a stubborn tenant is intent on leaving.

Security Deposit

The terms of the rental security deposit are often an understated paragraph in a lease and yet are financially critical. For example, you can require double the security deposit for a tenant with a poor credit history. This, or prepayments of one or more months’ rent may make you willing to qualify and rent to people you would otherwise turn away. This can reduce your vacancy rate and produces a win-win situation.

In addition, you can avoid the tendency for tenants to use their security deposit to pay the last month’s rent. Include a provision that allows you to hold the security deposit until your tenant has moved out completely, the unit is inspected and you find no damages.

Sublets

In many jurisdictions subleasing is legal unless specifically prohibited by the terms of a lease. Including this provision protects you from a tenant subletting to someone you have not vetted and discovering that it was within the tenant’s rights to do so.

Utilities

The electric, heat and gas clause in your residential lease can be important, if you do not have a separate meter for each rentable space. Be sure your lease specifies the tenant’s financial responsibility for the cost of the utilities and how it will be calculated.

Upgrades or Extensions

Sometimes a good tenant will want to expand into other properties adjacent to the leased space, or extend a current lease to take advantage of pricing or certain cash flow opportunities. The lease should provide for those opportunities.

Terms and Conditions

Terms and conditions are meant to protect you and your firm. Among the terms and conditions to consider are:

  • The conditions under which a lease be terminated for breach of contract?
  • A “bad tenant’ provision that protects you in the event that a tenant disrupts the environment, uses corporate facilities as living quarters, or performs a myriad of other undesirable acts. A solid lease can give you the opportunity to cancel and hold the tenant accountable for the remaining financial obligation without access to the unit.

A strong lease will protect you and your firm from financial harm. However, it cannot do this if it is not well-written, draft a lease that can adapt to the ever-changing needs of your tenant base.

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