Renters Beware: 15 Warning Signs Of A Bad Lease

Real Estate

If you’re looking to rent a home or apartment during this time in your life, you’re not alone. Many people opt to rent rather than buy. However, it’s important you know exactly what you’re signing up for when reviewing your new lease.

Members of Forbes Real Estate Council share warning signs that renters tend to overlook when signing a lease. Here’s how noticing these signs can help you avoid falling victim to bad leases.

1. No Buy-Out Clause

Make sure there is a predetermined and reasonable buy-out clause in the event plans change and the lease needs to be terminated prior to the end of the lease. We find it reasonable to allow a lease to be terminated upon 60 days notice plus the payment of two additional month’s rent. Residents appreciate the option should plans change. – Michael Zaransky, MZ Capital Partners

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2. Lease Clauses That Give Other Parties Leverage

Don’t assume the lease is just “standard language.” Understand the lease agreement and the implications if you don’t perform your duties. Make sure that you negotiate even the worst-case scenarios carefully as you never know what will happen or how it will impact you. Most importantly, you can’t allow random lease clauses to provide the other parties with leverage over you. – Jonathan Keyser, Keyser


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3. No Remedies If The Landlord Defaults

Many leases are written to protect the landlord in the event that the tenant defaults on the terms of the lease. These defaults can be falling behind in rent or storing items that are prohibited, having pets, etc. Any number of tenant actions can be cause for default, but landlords can default, too, most commonly by not performing repairs. Make sure that you as a tenant have remedies in the case of a landlord defaulting. – Kristin Geenty, The Geenty Group, Realtors

4. An Unclear Lease-Break Requirement

Taking the time to understand all lease terms is hugely beneficial for a renter. Lease terms should be carefully reviewed prior to signing a contract as details are intricate and can vary significantly from state to state. A major cause of confusion is the lease-break requirement. It can be costly for a renter if they do not understand how to properly provide notice to vacate. Communication is key! – Don Wenner, DLP Real Estate Capital

5. Any Non-Standard Lease Items

The key is to look at addendums and other non-standard items. Some states like Texas have a standard lease agreement. The key is to know your security deposit, any personal information you need to share, who the person you are sharing your information with is and whether they have their information secure. In this day and age, you have to be careful that you are working with properly licensed people. – Chander Mishra, Accel Equity Group LLC

6. No Clarity On Resolving Discrepancies

In many cases, a good lease also discusses the process to resolve discrepancies. In other words, a lease is in many ways a guide not only to recourse but disagreement as well. Look for the guide in the lease and understand it ahead of time rather than going to the contract when there’s a problem and having to react to it then. – Clark Twiddy, Twiddy & Company

7. A Lease Written By A Family Member

Be careful when renting from family! It might help build generational wealth, but it can also inject all kinds of sticky interpersonal problems into your relationship. In my opinion, professional rental management companies are a surefire buffer between owners and tenants. Barring such measures, I’d caution renters to steer clear of a lease written by a loved one. – Michael McMullen, Prominence Homes and Communities

8. Contracts That Don’t Spell Out Your Rights And Duties As Tenant

Understand both your rights and your duties contained in the leasehold agreement. It is a legally binding contract and should be taken seriously by all parties signing it. Many leasehold agreements are form contracts with addendums added to address a specific property. States vary widely in landlord-tenant laws and renters should stay informed.  – Anne Keshen, RMT Capital Management 

9. ‘Free’ Months Of Rent

Rather than lowering the price, some landlords are now offering up to four months “free” when signing a new lease to attract new tenants. When the lease expires, the new expected rent is often too high for the tenant to afford. A $2,625/month net effective on a 16-month lease with four months free will turn into $3,500/month when the lease is renewed. – Rodolfo Delgado, Replay Listings

10. Pushback From The Landlord

Every rental property has some deferred maintenance, so the question is how willing the landlord is to correct the current issues before you move in. If the landlord gives a lot of pushback during the honeymoon period, don’t expect the marriage to be any better. – Nick Ron, House Buyers of America

11. Leases That Look Too Good To Be True

Check with a real estate agent or a local professional to confirm the rental listing is legitimate. Fraudulent listings are very common, and if it looks too good to be true, chances are that it is. Be very careful of where you deposit or wire your security deposit. Double and triple-check the instructions and always verify by phone before you send money. – Ron Costa, The Eighty Two Group

12. Landlord Pressure

Being pressured into signing a lease with language such as “this offer is available only if you sign now” is a red flag. Leases are legal contracts. Often, individuals glance over the fine print as the language may be hard to understand. Taking the contract home to fully review it is the first step. Additionally, hiring an attorney for a 1H review may save you thousands down the line. – Marco Del Zotto, LIV | Sotheby’s International Realty – Breckenridge CO

13. Poor Or Nonexistent Property Manager Reviews

A lack of social or online validation such as reviews is a bad sign. Renters need to ensure they’re working with a reputable and well-respected property manager that will look after their best interest. A good property manager takes good care and sees value in the relationship of both the investor and tenant. It costs a renter nothing to get this representation. – Chris Turcotte, Centum Financial Group

14. Addendums Longer Than Two Pages

Watch for an addendum longer than two pages. If a landlord has a list of over 50 items that they want a renter to read over and sign in addition to the lease itself—that could mean trouble for the renter. Keep a keen eye on fees and penalties. Some property owners go overboard in the amount of money they charge you for key replacements or trash tickets. – Demetrios Salpoglou, Boston Pads LLC

15. Fine Print About Late Fees And Finance Charges

Standard lease agreements have a provision that talks about what happens when and if rent is late. Some renters never read the fine print and may be surprised to get hit with exuberant fees and charges for a missed payment. It’s important to read and understand how late fees are charged and if the amount is statutory legal in a particular state. – Jason Duff, Small Nation

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