What Should be Included in a Residential Lease: The Basics
When leasing a residential property it is important to ensure that both you and the tenant know exactly what is expected from you and what to expect from the other party.
While some oral leases can be legally binding, a diligent landlord will stick to the more traditional written format. This not only helps to protect both parties, but also makes it much easier to recall what exactly was agreed upon later down the road when questions may arise.
But what items should be addressed in the lease? Some of the most basic items to include are:
The Commencement and Expiration Dates:
One of the most important items to include in a written lease is the commencement and expiration date. This allows both parties to prepare themselves and the property for the move in date while also preventing either party from ending the occupancy earlier than expected. If either party attempts to end the occupancy prior to the expiration date stated in the lease that party could be held responsible for the damage caused to the other party (depending on the other lease terms).
The Rental Rate & Due Date:
Another major point to ensure is included is the expected rental rate and due date. This sets financial expectations for both landlord and tenant and allows each party to budget accordingly.
When determining the desired due date keep in mind that, to say compliant with the Texas Property Code, you can not start charging late fees until the rent has remained unpaid for two full days after the original due date.
Even though the expectation on timely payment will be set by providing a due date it is best to include details on what will happen if that due date is not met.
Providing late fees amounts ahead of time can be an excellent deterrent for late payments. If the tenant knows that they will incur extra cost by paying late they will be more likely to ensure that the payment is received on time.
Keep in mind that, if you fail to put late charges in the lease, you will not be able to charge them to the tenant if they fail to pay timely.
Sec. 92.019. LATE PAYMENT OF RENT; FEES
In addition to the rental rate and late fees, another fee that should be included in the residential lease is the security deposit. A security deposit helps protect the landlord from incurring the cost of tenant caused damage and helps deter the tenant, who hopes to receive all of the deposit back at the end of their occupancy, from causing any damage above and beyond normal wear and tear.
Sec. 92.104. RETENTION OF SECURITY DEPOSIT; ACCOUNTING.
While these basic terms should be included in every lease there is much more to be considered when signing a lease with a tenant.
One (out of many) reason to hire a professional property management company is that each company will have a lease that has been typed by a legal professional. Frontline Property Management, Inc., for example, uses the Texas Association of Realtors (TAR) Residential Lease, which is only available to Realtors and is written by TAR lawyers.
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Application Process: Fraudulent Digital Documents (And How to Spot Them)
We’ve previously given tips on the application process as well as how to manage a property from out of state (or from any distance from the actual property). However, as time marches on in the digital world, we face new challenges.
A feature of processing applications in the age of remote work and distance is the upsurge in falsified documents. Unfortunately, as it’s never been easier to conduct the entire application process online, it’s equally as convenient for applicants to create mock-up documents. Here are a few ways to help sharpen your eye when processing your online applications!
Processing documents whether online or in person will require a base knowledge of document types. Fraudulent documents are sometimes easier to identify in person due to the physical integrity of the documents, such as the particular lamination of a Driver’s License / State ID or the specific texture of banknote paper that Social Security Cards are made of. Being able to see and touch a document is handy, but online you will need to be familiar with the built-in security features that these documents have.
Texas Driver’s Licenses have changed multiple times, and the Under-21 IDs have a different orientation. Of course, you will have out-of-state applicants, so it will be handy to look up that state’s identification security features.
Social Security Cards have a history of carefully documented styles, which you will need to reference in relation to the date the card was issued. Other features make it difficult to forge, the noticeable of which are the font, print style and official seal.
Payroll statements are the most varied document that you will receive as a landlord. There is no standardized payroll sheet, and with the emergence of the gig economy, you’ll be looking at many more screenshots of direct payments than the traditional payroll. Being aware of different payment methods and payment processes will help you parse out the real from the fake.
A great deal of fraudulent documents can be discovered with a brief review. Fraudulent applicants make common mistakes and spelling errors. On a proper document, all of the information will be consistent, and everything will be spelled correctly. Street names will be properly capitalized and business will have the correct designation (LLC, Corp, et al). Obvious photoshop or image manipulation will be easily identifiable in the signature line and in photos. ID photos are produced on a very consistent basis to help with this, and should not appear to be edited and should be consistent with the security features of the given ID.
Simply proofreading the submitted documents can flag a document as potentially fraudulent.
Reverse Image Search
Those who create fraudulent documents aren’t usually masters of the craft. There are thousands of templates online, not so that there are options to commit fraud, but because we live in an age of entrepreneurship and there has to be a system of payment for small business. Unfortunately, this does leave the door wide open for people to create a false payment record for themselves. And because you’re a landlord and not the IRS, you have very little to compare it to! Luckily, there’s a handy tool in Google Reverse Image search. Rather than scrolling through pages and pages of online payroll templates, you can upload the image and find it much more easily. (We do live in the future, after all!). Of course, these templates are made to be used, so just because a template matches doesn’t mean it’s fraudulent. Using your proofreading will come into play here: often, the fraudulent document will use the exact same check and batch numbers as the template, which is incorrect for a proper business to do.
The easiest and most important step to implement into your application process is to follow up on the application. As part of the process, you should have a release form that is signed by your applicant. This authorizes you to request both rental and employment information from the appropriate parties. With minimum investigative work, you should be able to find a contact number for a company or previous residence. You do not have to rely on the contact information provided by the applicant, and it best not to. Independent verification of the applicant’s information is critical to the application process – it’s the whole point!
For every application you should be contacting the previous residence yourself and following up with the current employer to confirm current employment information. They are under no obligation to release the information to you, but it is both a matter of fairness and due diligence that you follow up on every application.
If this sounds like a lot of work, it’s because it is! Finding a Property Manager who is effective not only at getting applications for your property, but also properly vetting them is key to finding a qualified tenant as soon as possible.
Reach out to Frontline Property Management today to explore the possibilities of never having to run your own applications again!
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Property Management Record-Keeping: How to Properly Destroy Sensitive Documents
In the age of an increasing need for cyber-security due to rampant identity theft, the common person has a good grasp on what sensitive information needs to be protected. That protection doesn’t end when it’s time to toss out the old and bring in the new – especially not when it comes to the kinds of documents you handle in property management. Applicants hand over their social security numbers, credit and criminal backgrounds, and your own information is all over your business documents, taxes, and filings. During the transition from paper to digital files, you will inevitably end up facing the issue:
How do I get rid of these excess or expired documents?
Legally speaking, whether you are managing only one property or multiple, by retaining consumer information for business purposes, you are subject to legal obligations in your method of erasure and disposal. You or your Retention Officer should be well-read on how to properly keep, protect and ultimately dispose of your records.
Digitization will result in the need to eliminate your property management file folders, stacks of papers and old copies of licenses and ledgers. The end result of whichever method you choose is that the documents cannot practically be read or reconstructed. These methods include:
Anyone who’s ever watched a crime drama knows that your deleted files are never really gone. The “trash” or “recycle” bin of your computer is a holding area for files you don’t want to see anymore. Even when you “empty” those areas, the files are still in your machine and are recoverable – by you, if you’re desperately trying to find that document you didn’t mean to delete or by an unauthorized person looking to make a profit from stolen data.
The simplest way to go about ensuring that your sensitive data is effectively erased is to seek out software that’s up to the task! A software that performs a “Secure Erase” and other erasure / overwriting tactics can completely wipe a hard drive and prevent anyone from mining data from your systems.
One of the most direct things you can do to protect your documents prior to discarding them is to redact as you go. Redactions are the obscured bits of text in a document that are obscured, censored or deleted for a variety of reasons, all of which are ultimately for privacy.
If you are not digitally reacting documents that you are legally obligated to keep on file, then you are putting your business on the market to be targeted by hackers and identity thieves. However, it is not enough that the documents are redacted – they must be redacted correctly.
Redaction failures can be defeated by the embarrassingly easy process of copy + paste, leaving your and your tenants’ information at risk in case of a breach. A properly sanitized document erases all metadata and source information, and irrevocably deletes information behind the black redaction boxes. In other words, it creates an entirely new document that replaces the original and severs ties to any information that the original contained. It is a picture of the redacted document, and not the document itself.
Your goal at every step of the process is to be legally compliant but also orderly and secure!
Frontline Property Management invites you to explore our entire series on Record Keeping! Our business is your business, and our integrated systems ensure that our information is streamlined, secure and adaptive. Our multiple departments and property managers work together seamlessly to provide great service to you and your tenants.
If you would like to learn how we can help you manage properties in the DFW area (and beyond!) – start a conversation with us today! We protect your frontline so that you can worry about your bottom line.
Property Management Record-Keeping: Business Documents
As we’ve said before, being a landlord is a business. To stay on top of your business, you need to maintain all files that support the structure of your operations. You are building your financial future – consider your paperwork the bedrock!
In Texas, you are not required to have a rental license in order to rent your property to others, but that doesn’t mean you aren’t engaging in a highly regulated and litigious business. Like trouble, property management mistakes can be easy to get into and hard to get out of. No one has ever been hurt by crossing too many Ts and dotting too many Is – especially when you are your own oversight!
Files that you want to have on hand (or accessible and easy to find) include:
- Licenses as required by your state, eg, Real Estate Broker’s license
- Employee & Vendor Records (Including verification of liability insurance for Vendors)
- Audit Records
- Property Insurance Documents
- Templates of Contracts that you use for your tenants
Accessibility is important in the event that someone needs to find documentation on your behalf. Your lawyer, business partner, or employee should not have to disassemble your property in order to find these documents!
Most of these can (and should!) be cached digitally – but keep in mind that these documents may have sensitive information embedded in them. Properly redacted documents will keep your (and your tenants and vendors’) information confidential and safe in the event of unauthorized access to the files, or if the physical files are lost.
You may find that you would rather trust a company that employs licensed professionals to do all of this work for you! Our Property Managers are experienced not only in working with tenants, but also in teaming up with the Tenant Coordination and Accounting Departments to keep your business organized, legally compliant, and secure!
Contact us today to learn how we can help you manage your property!
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Property Management Record-Keeping: Owner Files
We are all well practiced in sorting out junk mail, whether it’s in our physical mailbox or the various email inboxes that easily become overpopulated with information, offers, and copies of copies (of copies) that you simply do not need.
When managing your property, how do you know what documents you need?
What are Owner Files?
As we go through this series of Record-Keeping Basics, we’ll help you to distinguish between the different types of files that you’re handling to better help you organize. We’ve already reviewed Tenant files, and Owner files cover much of the same type of information; however, this is information that pertains directly to you and your business practices involving your property.
For instance, to provide the basic specs of the property in order to compose a profile for advertising purposes you need:
- Property Deed
- Property Tax Records
- Your Marketing Profile (Compiling photos and information will make it quick and easy to market your property!)
To ensure that your property is a habitable environment, you will need:
- Property Insurance Policy Records
- Property Maintenance Records (Requests & Repairs)
- Move-In Inventory & Condition Forms
- Move-Out Inventory & Condition Forms
- Photos of any damages sustained by the property
- Photos of any repairs or upgrades to the property
In order to operate as a business, you need to know what your expenditures are to figure out where your bottom line needs to be. Consider documents like:
Lastly, property management is about relationships. The contracts you keep with other businesses are your keys to success. Make sure that you retain copies of:
- Vendor contracts
- Employee Records (if you hire an assistant to help you)
- Owner-Management Agreements
- All Correspondence with the above entities
How Should Owner Files be Organized?
Firstly, your Document Retention Officer (you, if you are managing your own property) should be involved in all aspects of document organization. By no means should you purge without consulting your DRO or your own Document Retention Policy. Consistency is key.
Your attorney and accountant also need to be kept apprised of your record retention policy. If necessary, they will need to be able to locate documents on your behalf, and as such must know where they are and how to access them.
All this being said, you do not necessarily have to have the most high-tech integrated system – those aren’t free. Using readily available resources such as computer files backed up into a cloud storage may be perfectly fine for you, if you are organized and have only one or just a few properties to manage.
However, if in your cost/benefit analysis you find that your time can be better utilized elsewhere, property management software provides a system that is already in place – you just have to be consistent in inputting the information!
But if at the end of the day you decide that your time would be best utilized spending time with your family, investing in your hobby, or any one of a million things more thrilling than dotting the i’s and crossing the t’s of your paperwork – then perhaps what you’re most interested in is finding a property management company with the experience, staffing, and attention to detail you need for your rental properties.
Frontline Property Management is in the business of building relationships with owners like you!
Contact us today to start the conversation of how we can cover your front line in order to protect your bottom line.
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Property Management Record-Keeping: Tenant Files
As a landlord, the bulk of your records will consist of Tenant Files.
This is because every tenant (and every applicant) creates an exponential amount of paperwork that must be transferred, completed and filed away. These are records you will retain for a period of at least five years, or in direct relation to however long the statute of limitations for making a claim is in your state.
Property Management software is useful in integrating all of the necessary steps and documents into a streamlined process that flows seamlessly into a record filing system. However, keep in mind that even the best software is only as good as its operator. Records require maintenance and consistent input. This means that emails and documentation created outside of the system should be added in a timely manner and destroyed / deleted / disposed of when the time comes.
We’ve reviewed that as a landlord or property manager, it’s important that you retain tenant files in the case that there is ever any legal claim made against you. Expect that you will have to be able to create a detailed timeline of your every interaction with your tenant from beginning to end. This should assist you in conducting your business in a professional manner (imagine that every document you send and phone call you make can be presented to someone else for review) and will keep you covered. These documents can also carry your case in a court procedure like an eviction.
It’s understood that leases are legally binding documents and should be read in their entirety; however, you will find that many tenants do not familiarize themselves with the details of their lease. Having the signed documentation on hand affirms that the tenant agreed to the terms laid out to them. Whether or not they understood the document is subjective to the tenant, and is solely the tenant’s responsibility. Objectively, however, the paperwork will support your case.
Remember that there are some things that are confidential and as such, even if the information is revealed in the course of conversation, should not be filed as pertinent information to you. You are obligated always to adhere to the Federal Fair Housing laws, and as such your tenant files should not contain any information regarding a tenant’s disability (other than in a quantifiable capacity, as proof of income or related to a reasonable accommodation request) or of any services the tenant receives in relation to said disability. That information is strictly confidential and should not be anywhere in your records.
The following, however, most certainly should be:
- Credit/Background Screening
- Application Fees
- Income Verification
The Rental Agreement / Lease
- Signed Copies of Lease & All Addendums/Riders
- Move-In Inspections
- Move-Out Inspections w/ Itemized Deductions List
- Pet Policy Agreement
- Information on How to Submit Service Request
- Record of Receipt of Keys Upon Move-Out
- Notice of Changes to Property, Lease, Payment Arrangments or Management
- Eviction Notices
- Request for the Remittance of Payment
- Service/Maintenance Request, Evidence of Follow-Up Actions
- Property Maintenance Notices
- Intent to Access Premises for Repair/Inspection
- Notice of Lease Violations
- All Emails and Correspondence
- Security/Other Deposits
- Rental Payments
- Late Fees
- Returned Payments