EP15: Lease Agreements

Welcome back to the Property Investors Handbook podcast! In this episode, host Adam Bell and property management expert Colleen Sutherland dive deep into the intricate world of lease agreements. Whether you're a landlord, property owner, or tenant, understanding the nuances of lease agreements is essential.

Colleen sheds light on the critical components of a lease agreement, emphasizing its legal binding nature and the importance of accurate documentation for both parties. From rent and bond negotiation to pet clauses and red flags, this episode provides invaluable insights for navigating lease agreements effectively.

Discover the common pitfalls to avoid, the negotiation points that can be leveraged, and the necessity of thorough checks before signing any lease document. With Colleen's expert advice and professional experience, listeners gain a clear understanding of how to protect their investments and maintain a harmonious landlord-tenant relationship.

For those seeking professional assistance or guidance in property management, Colleen and her team at Sutherland's Property Management Group offer comprehensive services tailored to your needs. Visit their website for more information and expert support.

Don't miss out on this insightful episode packed with practical tips and strategies for mastering lease agreements. Tune in now and unlock the secrets to successful property management!

What is The Property Investors Handbook With Colleen Sutherland?

Discover the secrets of successful property management and investing on "The Property Investors Handbook" podcast. Join Colleen Sutherland as she shares expert insights and strategies for acquiring, managing, and maximising returns on real estate investments. Whether you're a beginner or seasoned investor, this podcast is your essential guide to navigating the world of property investment. Tune in and unlock the keys to financial success in real estate.

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  Hello and welcome to the Property Investors Handbook podcast where we shine a light on the ins and outs of property investment and management. Now I'm your host Adam Bell and in this episode we're going to have a look at something that's well at the very heart of of property management, which is the lease agreement.

So this is something for both landlords, property owners and tenants alike.

Now, joining us again is Colleen Sutherland, who's here to help us navigate through this maze of lease agreements. Colleen, it's great to have you with us. Thank you. Okay. So a lease, that's the, it's the agreement between the landlord and the tenant and lays out terms. All of the legalities of that tenancy.

So very important. So look, can you start by maybe giving us an overview of what a lease agreement typically includes and why it is so important for both parties? Firstly, why it's so important for both parties is it's a legal binding document. So once you've signed it, that's. legal binding and you can only change it through mutual agreement and in writing.

So you've got your legal binding document and it will outline you as the landlord, me as the tenant, Susie as the agent, but you've also got lease start dates, lease end dates, how much the rent is going to be, the bond and it's got Got all that as standard. A lot of people don't necessarily put them in a standard.

So you've really got to check your lease and make sure that it's right. The other thing to know is that you're not contracting out of the Act. And that means that you're asking the tenant, you as the landlord, is asking the tenant to do something that under legislation is not allowed. So if you're asking the tenant to check the smoke alarms, and that's written in the lease, even though the tenant will sign that, if that goes to QCAT, which is the tribunal, and he sees that, he'll go, no, that's not the tenant.

And so you've contracted out of the act and you may have negated. Whatever the actual legislation is. So you've got to be very careful. Yeah, not to just add clauses Because you think the tenant should do it. Yeah being very careful That's something that adjudicators are very big on stamping out Okay, and something obviously, you know backwards and make sure it's Something that you can't have in there is ever included.

Yeah. So if you're putting it in the lease, you're putting in a clause that's in the lease, you need to get a solicitor to draw it out because we're not solicitors. And when legal stuff goes wrong, it'll go really badly wrong. Sure. And I guess the other thing about a lease agreement, while we're just talking about it in itself, it becomes the.

As you said, a legally binding document. And we've talked about this so many times, if something goes wrong, if there's a problem, if there's it, that is basically the rule book, isn't it? And it's what's going to be looked at when it goes to a tribunal or anything like that. So very important that both parties know what's in it.

And that it's drawn up correctly with the right information. So that's exactly right. Yes. It has to have the right basic information in there. If there is anything in particular, that's not normal with lots of other properties, it will go in under a special instructions agreement, which means it's totally separate from the lease, but it will deal with things like septics and septic tanks, sewerage, the You've got horse fences, you've got fruit trees, that sort of thing.

It has to be in a separate document because otherwise your solicitor's drawing up all sorts, but once it's signed off, that just allows the tenant to know and understand how to operate the water tank. All those things that I mentioned. Sure. Yeah. Okay. What are some of the most common clauses in a standard lease?

One of the main clauses is if you. have a pet. So whether you bring the pet and it gets approved or you have a pet during the tenancy and it gets approved. And let me say, stress the word approved because lots of things can go awry. But anyway. And just on that, there is a whole other podcast we have done on pets.

So if you need to know, you know, exactly ins and outs of pets, please go back and have a look at that earlier episode. Yes. So if you've got this pet, that will come with a set of clauses of what the tenant can and can't do with a pet. So it's not the same as a human. So there can be a little bit of discrimination there, but whether you have the pet inside and it is, you're then insisting on the carpet cleaning and pest control, that's fine.

But if you're insisting on an outside pet and that's written in the lease, if the pet comes inside, We can't just automatically charge for flea treatment and carpet cleaning. Yeah, it's a very fine line and you have to understand what that line is. Sure. And let me say that if it's not in writing, it doesn't exist.

If you've got a pet and you said, yeah, but so and so at the office said I could have this pet. Have you got it in writing? Is it on the lease? Then yeah, and it's, then it's a, no, you've got to get rid of the pet because you need to get approval before you get the pet. Okay. Let's talk negotiation points.

What on a lease can and can't be negotiated? What can be negotiated are the items that we in, And that change in every tenancy. So what can be negotiated is the start date, the end date, the rent, the bond, and those sort of things. They can all be Can the bond be negotiated? Is there a, is there something that, is there a minimum?

The minimum is four times the weekly rent. But anything over 750 a week, the owner can name their bond. Right. So, the owner will, may say, six weeks rent for the bond because it's much higher rate. Wow. Six weeks for the bond. I didn't realise that. Yeah. And so, I want X dollars or the bond is now going to be 6, 000 and that's however many weeks or just a nominated figure.

Wow. Yeah. Wow. So, what's that, it's capped at seven, at 750 is where that per week rent is where that. Anything from 750 and over can have, nominate, the owner can nominate the bond. Wow. Because it's such a high rent, each week that the tenant may not pay rent, it adds up very quickly. Sure. It's better to have a higher bond, but then that can be negotiated.

So if the owner wants 6, 000 and the tenant will pay 5, 000, then they can negotiate that. Okay. So, has, I've heard of situations where, again, property investors, owners, Haven't got a, someone in their corner like you, which is madness as far as I'm concerned, but. They just, they may have had one or a proper lease at some point and they just use a lease copy and paste a lease and do it themselves.

Yeah. What would you say around that? You would need to check everything every time you do a new lease. So what can happen and I've seen it a lot is that we've negotiated a new rent for the new lease. So say he's in there for 500 a week and if you renew the lease, you have to now pay 600 a week.

Everybody agrees. Lovely. Bye. Bye. If you're just using the same lease as before, you can easily miss whether it's a rent increase, the bond, the, or any start or end dates. So it's best to start a new lease every time you do the lease. Don't just copy and paste from the last lease because that's That'll get you into lots of trouble.

Sure. Okay. Now, again, this is probably only a question that's pertinent if they're not using a property manager, what would be some red flags from either the owner or the, or the tenant that might pop up when you're reading your lease? So you're the professional or you're the owner, you need to make sure that your information and legislation and knowledge is all up to date because there will be no second chances for you as the landlord.

He will give the benefit of the doubt always then to the tenant. And that's where a lot landlords will see that, oh, this is all geared towards the tenant. It is in a way, but if you know what you're doing and you're doing it right, it's not, you've got to. It's about doing it right. And that's again, why they should use Sutherlands.

Cause look, what I was going to ask, what systems and processes do you have in place to ensure that there are no mistakes on a lease? There's always human error, but we haven't had one for a long time, but The system that's in place is a checklist that we follow to a T, and even though you've done it a thousand times, we still follow that list, just to make sure that we've either increased the rent and or the bond, we've adjusted all the start dates, the end dates, included the pet, and that sort of thing, but your checklists have got to be spot on for those things, yeah.

Fantastic. All right. I guess I think the overarching piece of advice here for both tenants and landlords is before you sign this, check everything. It's an important document. And if you get anything wrong, you can be in big strife. So well worth the time to sit down and go through each and every time.

Yes. Yes. And when you get your lease, read through it. Question anything that you don't think's right. Make sure that the changes are modified, but also if it's not in writing, it doesn't exist. Very good point. Excellent. Thanks, Colleen, for breaking down the complexities of lease agreements and offering such valuable advice.

For our listeners, understanding your lease is crucial to protecting your investment and ensuring a positive landlord tenant relationship. So if you're looking for professional assistance or you have any questions about property management, I highly encourage you to connect with Colleen and her team at Southern's Property Management Group.

Visit their website, which is www. spmg. com. au where you'll find more information about their services. Now, don't forget to tune into our next episode of the podcast for more insights and making the most of your property investments. I'm Adam Bell. Thanks so much for listening and wishing you success in all your property endeavors.

Thanks Adam.