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What to Include in Your California Lease Agreement

 

A written lease agreement legally binds a landlord and a tenant. But, exactly what do you as a landlord include in your California lease agreement?

A lease agreement lays out the rights and responsibilities of you as the landlord and your tenant. Thus, knowing what to include becomes essential.

 

Include These in Your California Lease Agreement

 

Lawyers define a written lease agreement as a “bilateral” contract between two parties. What goes into the lease agreement determines whether you profit or fail as a landlord.

Leaving out important items lets tenants take advantage of you. Also, not including California legal requirements subjects you to fines and lesser profits.

 

So, What’s Necessary for a General Lease Agreement?

 

Let’s begin with what’s generally included in lease agreements before explaining California laws.

The following topics must appear in every lease agreement:

  • Description of the property and the parties;
  • Agreed rental amount;
  • When the rental period begins and ends;
  • When the rent becomes due and payment frequencies;
  • Condition of the property when the lease begins;
  • Maintenance and expectation that the tenant keeps everything in good condition;
  • Landlord’s inspections, repairs; and
  • How the tenant leaves the property.

 

Most Important Essentials of a Residential Lease Agreement

 

Let’s explore the important essentials of a general lease agreement:

 

1. Names of the tenant and occupiers

 

Every adult (persons over 18 years of age) living in the rental should sign the lease agreement.

This makes every adult legally responsible for paying the rent and following the responsibilities mentioned in the lease agreement. Thus, if an adult bails out and fails to pay the rent, you may seek full payment of the rent from the remaining adult tenants.

Also, this allows you to evict anyone you didn’t approve including friends, relatives, boarders, and sublets.

 

2. Limits on occupancy

 

Your lease should specify that it’s used only as a residence (no business purposes) by the tenants.

If you allow some business activities in the home or unit make sure to specify the types of business tenants may run from the home. And, include all required business permits.

 

3. Contact information

 

Require full contact information for all parties including ways to communicate in writing.

Requiring tenants to contact you in writing for certain events protects you in case a problem occurs. Keeping records of all written communications comes in handy in case a dispute ends up before a judge.

For instance, your lease agreement may require tenants to contact you in writing when needing repairs. Failing to contact you in writing protects you in case a known leaking water pipe erupts causing damage to the tenants’ personal property.

 

4. Description of the property

 

Lease agreements must include the complete address of the rental property (including building name and unit number).

Specify any included parking spaces and storage areas. Also, specify areas tenants not allowed to access like a locked backyard shed.

 

5. Term of the tenancy

 

Lease agreements always specify the starting date and ending period. Usually month-to-month for one or more years. Or, automatic renewal until either you or the tenant provides written notice to terminate the lease by a specific date.

No matter which method you use, make sure the lease agreement states the starting date, the length of the tenancy, and the expiration date or event.

 

6. Rent

 

Besides writing in the rent amount, include the due date (i.e. first of the month) and how to pay. Include acceptable payment methods like:

  • Cash;
  • Check;
  • ACH;
  • Online; or
  • Mailing to your home or office.

Note: California maintains laws about when rent is due (California Civil Code Section 1947) and where rent gets paid (California Civil Code Section 1962). See a detailed explanation below.

We also published a blog post explaining the many ways a California landlord collects rent here.

 

7. Deposits and fees

 

Avoid confusion by spelling out the required security deposit, how much, what for, and how & when you return the deposit. If you intend for part of the security deposit to cover “last month’s rent” specify it in the lease.

Include any legal non-refundable fees like for pets or mandatory cleaning.

Learn more about what entails reasonable landlord’s cleaning and repair costs to deduct from security deposits here.

 

8. Maintenance and repairs

 

Clearly set forth your and the tenant’s responsibilities for maintenance and repairs like:

  • Tenant’s responsibility to keep the property sanitary and clean and pay for damages caused by tenant’s abuse or neglect (except for normal wear & tear);
  • The tenant must notify you of any defects or dangerous conditions in the property;
  • Your policies for repairs;
  • Restricting tenant’s alterations and self-repairs without your permission; and
  • Your right to entry to make repairs, inspections, and maintenance with specifics about your advance notice before entering.

We also published a blog post about how California landlords handle tenants’ emergencies here.

 

9. Restricting tenant’s illegal activities

 

Prevent property damage, avoid trouble, and limit your exposure to lawsuits.

Include specific clauses prohibiting bad behavior like illegal activities (dealing drugs), and excessive noise.

 

10. Pets

 

If you don’t allow pets, make sure your lease says it. Also, if the building prohibits pets. Or, if the building allows pets, include their pet policies.

If you allow pets, specify restrictions like breeds, types, sizes, and how many. Also, if leashes required on pets outside the unit. Plus, require the tenant to keep the interior and yard free of animal waste.

Make the tenant pay for all damages caused by pets.

 

11. Smoking

 

If you want to restrict or prohibit smoking inside or in the yard, you must include them in your lease. State where and what tenants may smoke (cigars, pipes, cigarettes, pot, etc.).

Note: Although California legalized smoking marijuana, landlords maintain the right to prohibit or restrict where and what to smoke on the property.

 

12. Other restrictions

 

Your lease must follow all relevant laws. These include:

  • Health and safety codes;
  • Rent control laws and ordinances;
  • Anti-discrimination laws (Read our blog post about California Fair Housing Laws here);
  • Occupancy rules;
  • State disclosure laws (Read our recent post about the California Sex Offender Disclosure Law here);
  • Rules about parking space usage; and
  • Common areas use.

 

California Laws about Paying Rent

 

Like every other state, California maintains laws about various aspects of rent. These include:

  • Rent controls;
  • Deposits and fees;
  • Landlord access to rented properties;
  • When rents due and what happens if rent not paid by the due date;
  • What happens when the rent due date occurs on a holiday or weekend;
  • Rental grace periods;
  • Where to pay the rent;
  • Late fees;
  • Check bounce fees;
  • Landlord notice to increase rent; and
  • Terminating a lease for not paying rent.

 

California Rent Control Laws

 

California’s rent control law along with several city ordinances spell out how much landlords may charge for rent.

Learn more about California and local ordinances rent control in our recent blog post here.

 

California Security Deposit Law

 

California enacted a security deposit law. (Cal. Civ. Code Sections 1950.5, and 1940.5(g).)

View a summary of California’s security deposits law here.

Recently, we published a post about California’s Security Deposits Law here;

The security deposit limits in California include:

  • “Two months’ rent for unfurnished rentals;
  • Three months’ rent for furnished rentals; and
  • Add an extra half month’s rent for a waterbed.” (Source)

New Law: Beginning on January 1, 2020, active service members only pay one month’s rent for unfurnished; or two months’ rent for furnished. (Source)

The deadline for returning security deposits in California is 21 days. (Source)

 

Late Rent Payments in California

 

Every state maintains different laws about when rents get paid (holidays, Sundays, weekends, etc.), grace periods for penalizing late payments, and late fees.

California doesn’t require landlords to give tenants extra days to pay the rent. It’s due on the date the lease states. But, landlords may voluntarily include a grace period. (Source)

Read our blog post about “What to do when Your California Tenants Pay Rent Late” here.

 

Late Fees in California

 

California requires lease agreements to specify all late fees to become legal.

When tenants fail to fully pay by the specified rent due date, landlords may charge a late fee. But, California laws require landlords to only charge a late fee penalty based on a “reasonable estimate that the lateness costs the landlord”.

Here’s the court case for the California law on late fees: Orozco v. Casimiro 121 Cal.App.4th Supp. 7 (2004). Read a good explanation of it here.

 

California Bounced Check Fees

 

California limits landlords to charge $25 maximum for the first bounced check and $35 for each bounced check afterwards.

Here’s the California law about bounced checks fees: Cal. Civil Code. § 1719. Read a good explanation of the law here.

 

California Increase in Rent Notice Law

 

California requires landlords to give tenants at least 30 days to increase rents. Unless the lease agreement locks in the rental amount until it expires.

Also, time for the notice of rent increases to 60 days when the increased rent becomes more than 10% of the lowest rent charged over the past 12 months.

We published a blog post explaining “How to Raise Rent in California” here.

Rent Control Law: Since January 1, 2020, California landlords must abide by the statewide rent control law limiting how much to increase rents. (Source)

 

California Landlord Right of Entry Law

 

California landlords must respect their tenant’s privacy. But, sometimes landlords need to make repairs or maintenance to preserve their properties.

Thus, California laws allow landlords to provide:

  • “Reasonable notice” before entering a rented property; where
  • 24 hours presumed reasonable; and
  • 48 hours for the initial moving out inspection. (Source)

Read our post about the Landlord Right of Entry Law in California here.

 

California Law about Terminating Leases for Nonpayment of Rent

 

California landlords must give tenants at least 3 days’ notice to pay the rent or move after the due date expires. The 3 days exclude Saturdays, Sundays, and holidays. (Source)

If the tenant doesn’t move out or fully pay the rent, the landlord may file for an eviction.

Read our post explaining California’s Eviction Laws here.

View a law firm’s explanation of the California law about terminating leases for non-payment of rent here.

 

Conclusion

 

So, what to include in your California lease agreement?

This post explains the important terms of every lease agreement. Then it focused on California laws affecting lease agreements.

Consider these as the vital backbone of terms needed so you as an investor and a landlord protect your assets.

You need to establish a policy and procedures for: 

  • Collecting rents;
  • Protecting your property, appliances, and fixtures while making needed maintenance and repairs; and
  • Ensuring the tenant leaves on time and keeps your property in good condition.

 

Confused by all the Lease Terms and California Laws?

 

Don’t rely on simple lease agreements found online or in books.

Instead, rely on a professional property management company to safeguard your properties and collect rents on time.

Contact Us for all your property management needs in the greater San Diego area.

 

Steven Rich, MBA – Guest Blogger

 

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