Formalizing Rental Agreements: Avoiding Common Pitfalls

Posted Feb 28, 2025

By Washington State Real Estate Lawyer Zachary M. Smith

If you’re renting out a property or entering into a rental agreement, it’s essential to formalize the arrangement to protect both parties involved. Whether you’re renting to a friend, family member, or a stranger, a well-drafted rental agreement can prevent misunderstandings, legal disputes, and financial losses. Here’s why formalizing a rental agreement is crucial and how to avoid common pitfalls.

Why Formalize a Rental Agreement?

A formal rental agreement serves as a legal safeguard for both landlords and tenants. It sets clear expectations, protects relationships, and ensures that both parties are legally protected. Without a written agreement, you risk financial insecurity, disputes over property maintenance, and even claims of co-ownership.

Why Standard Rental Agreements Are Not Ideal

Standard rental agreements often lack personalization and may not fit the specific arrangement you have in mind. They may also fail to include key clauses, such as those preventing claims of tenancy in common or setting forth clear processes regarding renewal or early termination. To ensure your agreement is comprehensive and legally sound, consult a lawyer who can tailor the document to your unique situation.

Some Potential Terms to Include in a Rental Agreement

To avoid potential problems, your rental agreement should include the following key terms:

1. Names of All Parties Involved: Clearly identify the landlord and tenant(s).

1. Property Address and Description: Specify the exact property being rented, including any portion thereof, such as a storage shed or attic space, that the landlord does not want the tenant to utilize.

1. Rent Amount, Due Date, and Payment Method: Clear instructions regarding how rental payments must be made, specific the monthly amount, due date, and application of late fees if not paid on the due date.

1. Lease Duration: State clearly the duration of the lease, including the date on which the agreement shall no longer apply. The landlord should also include a provision that governs a tenant who remains on the premise beyond the lease term, such as month-to-month conditions.

1. Security Deposit: Define the amount of the security deposit and the conditions for its return. No landlord should provide access or keys to the property until the security deposit is paid.

1. Maintenance Responsibilities: Specifically identify the types of maintenance and repairs that will be the responsibility of the tenant, and which shall be the responsibility of the landlord. Include a clear process for recourse should either the landlord or the tenant incur costs for maintenance or repairs beyond their obligations set forth in the lease agreement.

1. Termination Conditions: Include terms for ending the lease prior to the conclusion of the lease term, such as notice requirements and applicable fees for early termination.

These terms are just the basics, each property and rental agreement is unique and requires a personalized approach.

Common Problems Without a Formal Agreement

One of the most significant risks of not having a formal rental agreement is the potential for claims of tenancy in common, where a tenant, like a friend or family member, may claim co-ownership of the property. This could lead to demands for equity or even a partition (read more HERE. To avoid this, your agreement should clearly state that the arrangement is a landlord-tenant relationship, not co-ownership, and include a clause waiving any claim to ownership or equity. Another common issue is overstaying or not paying rent. Tenants may refuse to leave after the lease ends or fail to pay rent on time. To mitigate this risk, include a clear eviction clause outlining the process for non-payment or overstaying. Specify penalties for late payments, such as late fees, and require a security deposit to cover unpaid rent or damages.

Conclusion

Formalizing a rental agreement is a critical step in protecting your property and financial interests. By including essential terms and addressing unique arrangements, you can avoid common pitfalls and ensure a smooth rental experience for all parties. If you need assistance drafting a rental agreement or have any questions, reach out to us at Beresford Booth. Click HERE to watch a webinar on this topic. To learn more about Washington’s Rental Agreements, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.

BERESFORD BOOTH has made this content available to the general public for informational purposes only. The information on this site is not intended to convey legal opinions or legal advice.