Being a landlord is a full-time job, even if it’s supposed to be a part-time one. Between finding great tenants and answering those late-night calls about clogged toilets, it can sometimes feel like there’s a never-ending list of tasks to accomplish.
One of the best ways to keep your business running smoothly is to organize all rental documents in a neat, meticulous, and accessible way. Failing to produce even a single document at a crucial moment could mean losing thousands from your hard-earned money through lengthy federal or tenant lawsuits. Yes, they’re that important. Read on to learn more about rental documents.
What Legal Rental Documents Should Every Landlord Keep on File?
Whether you’re a new landlord or an established one, these rental documents are an absolute must-have:
1. Lease/Rental Agreements
Your rental agreement is one of the main legal rental documents you need to get right. This may sound like a no-brainer, but you’d be surprised at the number of landlords that don’t get it right, or don’t even have one in the first place.
Rental agreements may vary, but the most basic one should include the following:
- Your rights and obligations as the property manager or landlord
- The tenant’s contact information
- The tenant’s rights and obligations
- The duration and terms of the lease
- Payment terms, including when rent is due, accepted payment options, and whether or not your charge late fees
It’s good practice to always have multiple copies of your lease agreements on hand. For each tenant that moves in, have them sign the agreement and retain a copy (this includes the co-signer/guarantor). This way, you’ll be better placed to protect yourself should any legal disputes arise in the future.
2. Rental Applications
As a landlord, it’s standard procedure to ask potential tenants to fill out a rental application. A rental application is simply a form that requests preliminary information about a tenant.
A typical rental application includes:
- Basic contact information
- Proof of income
- Employment history
- References
- Current and prior resident information
If more than one person will be residing in a single unit, or your prospect has a guarantor/co-signor, be sure to ask those individuals to fill out their own application as well. Once you’ve received these documents, begin the tenant screening process right away. Doing this will significantly reduce your risk of leasing to a tenant with a less-than-spectacular rental history.
3. Welcome Letter
Move-in is just the beginning of your landlord-tenant relationship, so you want to ensure you start off on the right foot. That’s where a welcome letter comes in.
Your welcome letter will help tenants remember and follow the property rules to a tee. Better yet, you’ll be able to answer questions before they’re even asked. You’ll also make an excellent first impression, and tenants will view you as a resourceful and professional landlord.
A good welcome letter will include:
- Details about move-in day
- How to set up, use, and pay utilities
- Where to pick up keys
- Where to throw away thrash and what day it’s collected
- A reminder about renters insurance (if you need it)
- How to report maintenance issues
- Neighborhood guidance
- Parking/towing information
4. Mortgage & Property Improvements
If there’s one rental document you should keep for your own sanity, it’s this one. Ensure all the mortgage information pertaining to your property is kept in a safe, easy-to-access place. These documents include your loan information, mortgage, repayment plans, and even the receipts/invoices reflecting improvements done to the property.
5. Emergency Contacts
Something unfortunate might befall your tenant‚Äîthey may incur a serious injury, fall ill, or fail to show up at work. As such, it’s incredibly important that you get them to provide you with one or more emergency contacts. You need these contacts so you know who to call if something bad happens.
This information can also come in handy in the event of an unauthorized move-out. If the tenant skipped town while owing you money, the collection agency has a much better chance of tracking them down.
If you’re a conscientious landlord, you’ll call and make sure these people actually exist. Once that’s done, compile the contacts into an accessible file or address book.
6. Move-In Checklist
Beyond just helping keep track of your property’s condition, a move-in checklist holds your tenants accountable for any damage that occurs during their stay. Without this document, it’ll be your word against theirs after move-out.
For tenants, a move-in checklist provides some much-needed peace of mind, assuring them that you won’t charge for damages they weren’t responsible for.
Make a point of reviewing the checklist when the tenant moves in, and then again during move-out, to find out if there’s any damage beyond the normal wear and tear.
7. A Checklist for Moving Out
If you decide to craft a move-in checklist, then it’s only prudent that you have a move-out checklist in place as well. Alongside the move-in checklist, the move-out checklist paints a complete “before and after” picture of the rental unit.
Unfortunately, some tenants might disagree with or deny any damages you uncovered prior to their move-out day. These types of disputes can land both of you in court. A move-out checklist serves as a crucial piece of evidence in case a legal dispute arises over withheld security deposit funds.
8. Addendum
Do you need to make one or two adjustments to the original lease agreement? Put them in writing using an addendum form, then have it signed by all your tenant to make it legally binding.
As a best practice, photocopy the addendum for your renters and file away the original one alongside the lease agreement.
9. Tax and Financial Records
This one is an absolute must. None-negotiable, if you may. Generally speaking, all landlords should hold on to the following financial documentation:
- Record of rental expenses
- Record of rental income
- Documentation to support that income and expenses (including receipts, invoices, and other forms of proof as mandated by the IRS).
The last point is often the one that carries the most weight. If you are expensing out things like entertainment and travel for your taxes, you will need to have indisputable proof showing that they were indeed business-related expenses. Why? Because these are the things that the IRS evaluates most closely.
10. Communication with Tenants
Our final ‘legal document every landlord should keep on file’ is actually not one document, but all of them. Well, all the communications you’ve had with a tenant from the day they sent in their application to their move-out day.
Keep all emails and text messages, even the ones that seem inconsequential. We all love the concept of ‘I am a man of my word,’ but that won’t help when you’re having to pay a mortgage due to a tenant defaulting their rent. So, take detailed and dated notes of every communication you have with tenants, including in-person meetings and telephone calls.
What Documents Should Landlords Receive Fresh Copies Of Every Year?
We see you asking, “But I already have all the aforementioned rental documents and even kept them on file.” That’s great.
However, a smart landlord will know that some of these documents must be updated yearly. After all, no one wants to open a file on the day of a lawsuit only to find that some of the information within is outdated and pretty much irrelevant.
With that in mind, here are some documents and individual pieces of information you should receive afresh every 12 months:
- Emergency contacts
- References
- A signed leased agreement
- Employment and income details
- Screening results
- The renter’s contact information
What Is the Best Way to Research Updates Made to Local and Federal Laws That Could Potentially Impact What Documents to Use?
Looking to find out whether there are any changes made to the federal or your state’s landlord-tenant laws, so you don’t end up using the wrong documents? A quick and incisive search on Google might just do the trick.
For local laws, any new updates are often published in the “pocket parts” of a specific landlord-tenant law book. Every state has several such books, each tackling a specific issue as it pertains to the typical landlord-tenant relationship. For example, if you are a landlord in Texas, the state’s law library recommends that you check out these landlord-tenant books every so often. Nolo has a full state-by-state rundown of landlord-tenant statutes, just in case you need it.
You’ll find the “pocket parts” at the back of each book. Even if the law you’re looking for is in the regular book, you should always check the pocket part to see if any changes to the law have been made. The pocket parts are updated every year.
For changes made to federal laws, your best bet is to keep checking established sites like Investopedia and Cornell Law School. These sites update their content every year, so you can rest assured that you’ll be getting nothing but spot-on, timely, and well-researched information.
Digital vs. Physical Copies: Pros & Cons
Digital Copy Pros
Some of the advantages you’ll enjoy once you start filing your rental documents electronically include:
- Saves money, effort, and time
- Better organization
- Competitive advantage
- Better than a filing cabinet
Digital Copy Cons
Security is arguably the main (and possibly the only) drawback associated with digital file keeping. This is especially the case if you employ a third party to do the filing for you. Besides, there are way too many hackers out there, and it takes just one wrong click for your most sensitive rental files to disappear into thin air.
Physical Copy Pros
Understandably, there are very few advantages associated with this form of record keeping. After all, no one wants to lose a critical rental file simply because they have frequent memory lapses.
That said, some of the pros you could possibly enjoy by storing your documents in physical files include:
- It provides a natural and dependable backup for digital files
- Always accessible (if the files are kept well, of course)
Physical Copy Cons
Before deciding on which filing option to choose, you’ll want to peruse these physical copy disadvantages first:
- Takes up a lot of space
- Prone to damage and being misplaced
- Hard to make changes
- Security concerns (definitely less secure than its digital counterpart)
- Higher initial and maintenance costs
Precautions to Take to Ensure Your Rental Documents are Kept Secure
You already know that you’ll always have a plethora of sensitive tenant and applicant information in your possession. That’s given. Factor in your own files, including those delicate rental income records, and you can see why it’s important to ensure everything is kept safe and secure.
While there’s no single foolproof way to safeguard data, some measures are significantly better than others. These include:
- Zip it: While it may go without saying, tenant or applicant information is something you shouldn’t be sharing. So, please, don’t release anything unless you have consent.
- The obvious but overlooked: Making sure your computer is secure is a must to protect sensitive rental documents. To that end, run security checks every now and then to ensure your device is running smoothing and securely. It’s also prudent to set strong passwords for your computer and limit access to it by anyone you don’t want viewing the sensitive information within.
- Destroy information, legally: There comes a time that you’ll need to do away with some of the rental documents you’re currently keeping. It’s inevitable. When disposing of confidential documents, it’s important that you do it both properly and legally. The best and most simple way to destroy paper documents is to use a paper shredder. As for digital copies, simply hit the delete button, and you’ll have discarded them for good.
Final Thoughts
While you may have plenty on your plate as a landlord, you can make things easier for yourself by keeping all your rental documents in an easy-to-access manner. It’s also a safety precaution that not only keeps the IRS at bay, but also protects you from any lawsuit that might be thrown your way in the future. Plus, it’s a great way to stay organized and neat.
At Prisma, we make rental documentation easy for you. We offer different types of legal rental documents so you can find the ones that best fit your requirements and budget. Who knew legal rental documentation would be this fast, fuss-free, and painless? Contact us today to learn more.
