Lease Agreement Essentials for DSCR Loan Properties

Your lease is the legal foundation of your DSCR investment. A weak lease leaves you vulnerable to non-payment, property damage, and costly disputes. A strong lease protects your income, property, and legal rights.

Must-Have Lease Clauses

1. Rent Terms

• Monthly rent amount
• Due date (1st of the month is standard)
• Acceptable payment methods
• Late fee amount and grace period (check state law — many require 3-5 day grace)
• NSF/returned payment fee

2. Security Deposit

• Amount (check state maximum — varies from 1 to no limit)
• What it covers (damages beyond normal wear and tear)
• Return timeline (typically 14-30 days after move-out per state law)
• Conditions for deductions (with itemized accounting)

3. Lease Term and Renewal

• Start and end dates
• Renewal terms (automatic month-to-month? renewal offer?)
• Notice to vacate requirements (30-60 days typically)
• Early termination clause and penalty (if any)

4. Maintenance and Repairs

• Tenant responsibilities (lawn care, light bulb replacement, filter changes)
• Landlord responsibilities (major systems, structural, habitability)
• How to submit maintenance requests
• Emergency repair procedures and contacts
• Tenant liability for damage caused by negligence

5. Occupancy Limits

• Named occupants on the lease
• Guest policy (maximum consecutive days for guests — typically 7-14)
• Subletting prohibition or approval requirement
• Maximum occupancy per local code

6. Pet Policy

• Pets allowed or prohibited
• Breed/weight/species restrictions
• Pet deposit or monthly pet rent
• Tenant liability for pet damage
• Service/emotional support animal exceptions (required by fair housing law)

7. Property Use Restrictions

• Residential use only (no home businesses that increase traffic/liability)
• No smoking inside the unit
• No illegal activity
• Quiet hours
• Parking assignment and rules

8. Insurance Requirements

• Require tenant renter's insurance ($100K+ liability)
• Provide proof of coverage before move-in
• Maintain coverage throughout the lease term

9. Entry and Access

• Landlord's right to enter with notice (24-48 hours per state law)
• Emergency entry without notice (water leak, fire, etc.)
• Entry for showings (near lease end)

10. Termination and Eviction

• Grounds for lease termination
• Notice requirements for non-payment
• Notice requirements for lease violations
• Reference to state-specific eviction procedures

State-Specific Requirements

Lease requirements vary dramatically by state. Critical areas to check:

• Security deposit limits and return timelines
• Late fee caps (some states limit to 5% of rent)
• Required disclosures (lead paint, mold, flooding history, sex offenders)
• Rent increase notice periods
• Lease renewal and non-renewal requirements

Use a state-specific lease template from your local real estate attorney or a reputable legal document provider (LegalZoom, Nolo, EZ Landlord Forms).

Addendums Worth Including

Move-In/Move-Out Inspection Addendum

Document the property's condition with photos at move-in (signed by both parties). This protects you during security deposit disputes.

Mold Disclosure and Prevention Addendum

Inform tenants about mold prevention (ventilation, reporting leaks) and establish their responsibility to report moisture issues promptly.

Bed Bug Addendum

Establish baseline responsibility and reporting requirements. Clarify who pays for treatment based on when the infestation is reported.

Crime-Free/Drug-Free Housing Addendum

Available in many jurisdictions. Allows faster termination for criminal activity on the premises.

Lease Mistakes That Cost Investors Money

1. Using a generic online lease — state-specific requirements mean generic leases may be unenforceable
2. Missing late fee provisions — without a clear late fee clause, collecting late fees may be illegal
3. Vague maintenance responsibilities — ambiguity leads to disputes about who pays for what
4. No renter's insurance requirement — when a tenant's negligence causes damage, their insurance should cover it
5. Allowing verbal agreements — if it's not in writing, it doesn't exist in court

Have an Attorney Review

Spending $300-$500 for a real estate attorney to review (or draft) your lease template is one of the best investments you'll make. A single clause that holds up in court can save thousands in a dispute.

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