Tip #38

Review the Lease with your Applicants before they Sign

Written on February 3, 2014 by , updated on June 7, 2014

Review the LeaseYears ago, I made one simple change to my rental process.

I began reviewing the entire lease with the applicant(s) before they sign it.

That’s right, page by page, clause by clause – preferably in person, and over coffee.

In my opinion, this has had an incredible impact on the quality and satisfaction level of the tenancy for both parties. I think this is because of the sense of transparency it fosters.

Let me be clear: I only do this review when it’s time to sign the lease. The qualified applicant has already been screened, paid a deposit and first month’s rent, and is ready to sign a lease.

What’s the Point?

I operate my properties under the premise that a transparent landlord will always be more profitable than one who tries to hide unfair and fee-laden clauses within a lease.

By reviewing the lease with an applicant before signing, I ensure that they are aware of every clause, condition, and responsibility that both parties will be held accountable to. It also provides an opportunity for them to ask questions about the house, the lease, or about me.

It’s About Trust

handshakeIt’s about building a relationship on trust. Trust that I will provide a suitable dwelling, and trust that they will pay rent.

Tenants seem to be really appreciative when I’m up front with all the terms and fees of the agreement. Looks like I’m not the only one who hates surprise fees… go figure.

Since I started doing this over six years ago, I have not had a single tenant say “I didn’t realize that clause was in there” or “what do you mean there’s a subletting fee?”

Maybe they do forget sometimes, but they come running to me because:

  1. I make sure they have a copy of the signed lease.
  2. They know that I would just point them to the lease clauses that we reviewed together – so they just look it up themselves.

By carefully reviewing the lease with my tenants, I’ve given them confidence in their landlord, and their new home.

What about Digital Signatures & Email?

You would be amazed how many landlords just send a copy of the lease via email and say “sign this, and let me know if you have any questions.”

Sure, this works, especially if you are communicating with someone from out-of-town. I’ve scanned and emailed leases, or used digital signature tools such as SignNow or DocuSign when I’m signing a tenant from across the country.

Don’t get me wrong; these tools are incredibly handy, but they remove the personal element from the equation.


Digital Signatures

Let’s get Personal

The landlord-tenant relationship is an extremely personal business. We’re dealing with a tenant’s home, where their family will sleep at night, their sanctuary. The landlord’s income is at risk, as well as a significant property investment worth 6-7 figures.

So much is on the line. Wouldn’t you want to meet your landlord or tenant face-to-face? (tweetable?)

Whenever I’ve digitally signed a lease or scanned it over email, I also have a phone conversation with the tenant to explain the clauses and outline my expectations.

I let the tenants know that I have a mortgage to pay and I will evict them if necessary. If they are late on rent, it affects my ability to pay the bank. I don’t mess around.

It’s okay to be stern, but be respectful.

In Summary

All in all, it only takes me 1.5 hours (with travel) to meet with an applicant to review and sign a lease. However, ensuring that they understand the legality of the contract and subsequent consequences for violations will save me multiple hours later.

It’s critically important for you to make sure your landlord-tenant relationship gets a nice start. My suggestion is to respectfully lay down the law in the beginning, and then lighten up later if you need to.  

Leases are legally binding contracts of consequence and many tenants don’t understand that. For your sake, make sure your tenants do. 

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