If you are the owner of a rental property and are using a lease that you found online, this article is for you.
There are many owners out there that go out and purchase a home, move a tenant in, and think that the lease they downloaded off the internet is going to work just fine. 18 months later, the yard looks terrible, the carpets have stains, and they are stuck with a $1,200 repair bill because the lease didn't have any provisions to require the tenant to mow the lawn or pull weeds. That's exactly what happened with one of our owner clients.
That actually happened. And it's more common around here than you'd think.
For most landlords, the rental property lease agreement is the most important tool to protect their investment property and rental income. The goal of this guide is to help local single-family home and townhome property investors and small to medium-sized property management companies better understand how to manage the lease agreement, common clauses, and some of the most important elements of lease agreements used in local single-family homes and townhome rental properties in the Bothell, Woodinville, Kirkland, Redmond, and surrounding areas of North King County and South Snohomish County.
The Basics of a Lease
A lease does two things: it sets expectations, and it creates a paper trail.
Simply putting your expectations in a lease are not enough to make them enforceable. Conversely, having a lease that is 12 pages long and is full of provisions is not enough. Many provisions in residential leases are deemed to be unlawful by Washington State courts and therefore void. Therefore, it is crucial to have a lease that is not only reasonable, but also compliant with the Residential Landlord-Tenant Act requirements. If not, you could lose in court and even be liable for the tenant's attorney's fees.
It's also important to recognize that unlawful lease provisions will be deemed void in their entirety by Washington courts and may even result in you being liable for your tenant's attorney's fees in addition to any other costs incurred as a result of their successful dispute. Rather than developing a lease that contains what you perceive to be tough provisions, therefore, the goal of an owner developing a written lease is to create a contract that will actually hold up in dispute with a tenant.
Residential Landlord Tenant Act Requirements that impact your lease
Washington's Residential Landlord-Tenant Act sets the floor. Whatever your lease says, it cannot go below it.
An itemized written statement of any deductions (such as for example for any part of the security deposit to be used for repairs to the rental property) must be provided to the tenant(s) within 21 days of the tenant vacating of the rental unit(s) and any such deductions must be reasonable. If an owner does not comply with the Residential Landlord Tenant Act (RLTA) requirements for returning security deposits, he or she could be liable for an amount equal to twice the amount of the security deposit.
The amount of time that you must give a month-to-month tenant notice of termination depends on how long that tenant has rented from you. For tenancies that have less than one year, 20 days written notice is required to terminate a tenancy. For tenants who have rented from you for one to two years, 60 days written notice of termination is required.
Since 2021, the Washington State Just Cause Eviction law was updated and affects the way lease non-renewals are managed in the greater Seattle metro area. Throughout the greater Seattle area, including Bothell and Kirkland, owners can no longer fail to renew a lease with just cause. The owner must provide a written justification for failing to offer a lease renewal based on one of the state's 16 just cause reasons. When documenting lease non-renewals that are not based on the tenant's behavior, landlords must describe in detail any documented lease violations by the tenant, whether or not those violations were ever cured by the tenant.
The Clauses That Trip Up Local Landlords
Landscaping: This is a consistent hotbed of dispute with single family and townhome rentals. Unless you specify in your lease what yard maintenance will be done and by whom (typically the tenant), how often it will be done, to what standards, and create an addendum that is attached to your lease agreement, you have no leg to stand on to deny a return of a deposit for over growth or for needed maintenance and then to bill the tenant for it. This type of thing can cost as much as $500 to $1,500 to fix, all because an owner failed to clearly lay out terms and conditions in advance for review and acceptance by the tenant.
Pet Clauses are the other major category that gets improperly written and often causes problems for Landlords. We have a case in progress where the landlord rented out a Kirkland townhouse to a tenant in a prior management situation and the lease was not properly written for pets. The tenant had an undisclosed dog and the landlord had to absorb $500 – $1500 of carpet damage at turnover when the tenant moved out because there were no provisions in writing for pets in the lease prior to the tenant taking possession.
late charges. What appear to be similar late charges to two different tenants can be found to be unfair to both owner and tenant if they appear to be punitive. Provide a reasonable late charge and spell out what charges apply when and include in your lease or rental agreement and provide to tenant prior to tenant signing. Do not fail to include in your lease or rental agreement a statement that late charges apply, rather detail and provide adequate advance notice to protect your interests.
The Contrarian Take on Lease Length
The majority of residential landlords believe that longer rental agreements translate into greater protection for themselves as landlords. However, in this fast changing market, longer fixed term rental agreements can have the reverse effect and lead to financial loss for landlords.
Prices for rentals in the Bothell, Woodinville, Kirkland, Redmond, and North and South areas of King and Snohomish County areas are climbing. The average rental price for single family homes and town homes managed by PMI Equitas is currently $4,210. A landlord who enters into a 2 year rental agreement at current prices would be in for a very large financial loss if rents increased substantially in the second year of the agreement. A 1 year agreement with a clear renewal process and rent increases would serve the landlord's interests far better than a long rental agreement with fixed rent for the entire term.
Regardless of the form of the lease, owners are well advised to begin the process of lease renewal at least 60 days prior to the end of the lease. If an owner fails to provide timely notice of intent to renew or fail to provide a timely written offer to renew or fail to provide a written offer to enter into a new lease with terms which are substantially identical to the soon to expire lease, then both at common law and under Washington law the tenancy automatically converts to a month to month tenancy. A tenant in a month to month tenancy is entitled to 60 days written notice of termination and the notice requirements for such a tenancy are governed by statute.
Pet Policy and Why "No Pets" Might Cost You
We actually encourage pet-friendly policies, with the right protections in place.
The property owner of a single family home in Bothell had intended to list the property as 'no pets' in order to attract what the owner believed would be a better quality of tenant. After a conversation with the property manager, the owner changed her mind and allowed pets. A service was used to screen for pets that assigns a pet rent based on the age, size and veterinary history of the animal. This way the owner is never underpaid for higher risk animals and is always fair to tenants with lower risk animals and well behaved pets. The property filled quickly and the owner received a higher rental rate than she had received from previous tenants.
The tech-sector here is comprised of many dogs. Many Amazon, Google, Microsoft, employees are young, have money and want to rent houses in Bothell with their young dogs. Many tenants want to have their dogs in their rental houses and it is in the best interest of owners to agree to that and charge a high pet rent to offset any damage to the rental houses. We encourage property owners with single family rental houses to allow pets and screen them.
What Good Lease Administration Actually Looks Like
A signed lease is the beginning, not the end.
Lease administration is tracking lease expirations, starting renewal conversations well in advance of lease expiration, documenting changes to leases during a tenancy by properly adding to the lease by written addendum, and keeping a record of all aspects of a lease that can be used as evidence in court if needed. At PMI Equitas we use Rentvine to manage all of this information. This allows all owners to have access to lease documents, maintenance records and financial information for their rental property 24/7 through an owner portal. This allows for instant information without having to go through phone tag.
Earlier in the year, one of our owners had a 4-unit property in Bothell, near where Future Vision Elementary School is. He had a couple of units vacant and was looking to rent them out prior to listing the property for sale. He was in the process of trying to close on the sale of the property and was also trying to get the existing tenants to move out. In the middle of this, he had two new prospects interested in one of the vacant units. The owner needed someone to assist in getting the new tenant into the unit prior to the close of escrow on the sale of the property. We were able to assist him in working with the two prospects, showing them the property and working with them to try to and get one of them to rent the unit. Prior to listing the property for sale, the owner had been getting $3,100 per month in rental income. It took us about a week to show the property and find a tenant. The tenant signed a 12-month lease at $4,200 per month and we were able to get him moved into the property prior to the close of escrow on the owner's sale.
How Does PMI Equitas Treat Lease Language That's Aggressive But Not Protected
When dealing with lease administration in Washington, a lot of owners are very concerned with putting in very strict language with huge penalties for not following the terms of the lease. It is common for owners to think that as long as they put in large penalties for things such as pets, smoking, etc. that they can eliminate the risk of problems with their tenants. However, under the laws of Washington State, any terms or provisions in a lease that are in conflict with the Rental Agreement laws (RLTA) will be found to be unenforceable by the courts. The worst part is that any provisions found to be unenforceable can actually cause more problems for the owner than they would have had without including those provisions in the first place.
In keeping with the name of our company, Equitas (which is Latin for fairness, equality and equity) we at PMI Equitas take a fair approach to drafting leases that respect tenant rights while, at the same time, ensuring that the owner's interests are fully protected and that lease terms are properly documented and enforced.
Our owners treat their homes with the proper respect as they enjoy the rent they are receiving and appreciate the added value that they receive from treating their tenants fair. Our experience is that tenants treat a Equitas Leased Home better when they have been treated fairly by the owner.
Lease Setup and Administration
We offer complete Lease Setup and administrative documentation for single houses and multi-unit houses that new landlords and property managers are managing themselves. A list of documents to be set up for administrative tasks to be done to set up and complete a Leasing cycle. These documents would include the complete lease agreement, required addenda's, such as: yard care, pets, who pays for utilities, early termination. Also move-in documents and all of the required documents to properly collect and manage tenant security deposits. We also will set up and complete all lease administrative tasks in compliance with current Washington landlord/tenant law.
The leasing fee for placing a tenant is $500. This includes the costs of photographs, marketing on various websites, and showings, and all of the administrative work required to process a lease and prepare a new tenant for move-in. There is no leasing fee charged until a tenant is placed. As an alternative to full property management, PMI Equitas also offers lease-only service to owners who prefer to manage the property themselves after placement of a tenant.
We would be more than happy to discuss how we can assist you with your lease administration needs.
FAQ
What are the required notice periods for ending a tenancy in Washington State?
For month-to-month tenancies with no fixed term, notice is 20 days in writing. For fixed term leases with terms of 1 to 2 years, written notice of 60 days is required. This is known as Just Cause Eviction and 16 specific circumstances must be cited for eviction to be legal.
How long does a landlord have to return a security deposit in Washington?
By Washington law, a landlord has 21 days after a rental unit becomes vacant to return any part of a security deposit to the tenant along with a written explanation for any money that was kept from the deposit. This explanation must be itemized to show how each individual amount of money was spent. Should a landlord fail to return a security deposit or provide a proper explanation for withholding a portion of it within 21 days, the landlord may be held liable for an amount equal to double the entire amount of the security deposit.
Can a landlord in Washington enforce any clause they want in a lease?
No. Any provision that a lease contains which attempts to waive a tenant's statutory rights as a tenant, such as the right to have a habitable dwelling, is prohibited by law and automatically void. If a landlord includes an unlawful provision in a lease and the tenant sues to have it stricken, the landlord could face the loss of the lawsuit and also be responsible for the tenant's attorney's fees.
Two-Year Leases - Good or Bad for Landlords?
While it might be perceived as, a 2 year lease is not always better for Landlords. As rent in rising, such as in Bothell and Kirkland, (avg rent now is $4,210 per month and climbing) locking into a below market rate for 2 years would cost a lot of money in lost income. A 1 year lease with a renewal and rental increases in place would probably be a better option for owners.
What should a pet policy include in a lease?
A good pet policy should include the following elements: 1) A Specific Number and/or Types of Animals Allowed; 2) A Deposit to cover any pet damages and/or extra clean-up that may be required; 3) A Monthly Pet Rent charged for and beyond the life of the initial Lease term; and 4) a Clearly Articulated Remedies if an Un-Authorized Animal (an "Undisclosed Pet") is found on your rented property at any time prior to the end of your Lease term. By utilizing a service that properly screens animals to determine the correct amount of Pet Rent for a specific animal, landlords can ensure they are charging reasonable additional rent to compensate for anticipated additional costs. This approach makes lease provisions related to pets far more defensible if they are ever challenged.
What does PMI Equitas charge for lease setup and management?
We charge a leasing fee when we place a tenant in your rental property. This is for the photography, marketing of your rental property, showings, and all of the work that our administration does to get you a tenant. Our leasing fee is a one-time charge and is a percentage of one month's rent for the property. After we have placed a tenant in your rental property, there is a monthly management fee that is charged. This is also a percentage of one month's rent for the property. We offer a lease-only service for those property owners who want to self-manage a rental property, but would like our assistance in placing a tenant. We do not charge any fees until we have placed a tenant in your rental property.
