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What Is Wrong With A Handshake And Verbal Lease Agreement

PMI Legacy - Thursday, May 28, 2020

There are some rental property owners out there that do not use written contracts. Don’t be one of these people. They’ll meet with a potential tenant, get a feel for the person, discuss basic terms, and have an agreement. 

This is a terrible way to conduct your rental business and ensures that your rental property ultimately loses you money. You should always have a written agreement between you and the tenant. This guide will explain all of the things that can go wrong when you only have a verbal lease agreement.

Disputes

Without a written agreement to reference, any minor issue can pop up later and spark a dispute. Both parties could honestly believe that their version and memory are correct. But there’s no way to prove who is right and which version to follow. 

An example of this in action is if the landlord agrees that the tenant’s one dog is allowed. Then the tenant gets another two dogs. As the landlord, you’re upset because you approved one dog, not three. While the tenant thinks you approved dogs and that the three dogs are ok under the verbal agreement. 

This potential for disputes can become even worse if one of the parties is less than honest. When there’s no written agreement, there’s greater opportunity to twist the facts and manipulate the situation. This can result in you losing out in court and losing money. 

Let’s assume you have a verbal lease agreement for a twelve-month lease with a tenant. Then five months in, the tenant decides to relocate and move out. You want to enforce the lease, but the tenant claims the agreement was month to month. 

Without a written agreement, you have no way of enforcing your agreement or proving that the lease is for one year. 

Fail to Discuss Key Issues

Without a written agreement, the landlord and tenant may fail to address critical issues. This can leave both parties either wondering or making assumptions about the agreement. For example, what happens if an appliance breaks in the home during the rental? 

Verbal agreements typically fail to address maintenance and repairs. Now the tenant doesn’t know what to expect, and the landlord has to scramble to resolve any problems. 

Another common issue is fees. Without a written agreement, you may fail to discuss potential fees. It’ll then be an unpleasant surprise when you charge an additional $25 for late rental payment or dishonored check. 

Not Enforceable

You may find that your verbal lease agreement is unenforceable in court. According to Utah law,  leases for longer than a year must be memorialized in some form of writing, or they’re unenforceable. Even if your agreement isn’t automatically disqualified, it still must pass the requirements for a contract under common or statutory law. 

There are several elements to qualifying as a contract, fail to meet them all, and you don’t have an enforceable lease contract. 

  • Offer and clear acceptance with both parties
  • Intent to form a contract
  • An obligation for each party to perform 
  • Good faith
  • Required consideration where each party gives something of value
  • Lack of valid defenses. 

Protect Yourself and Your Property

Having a written agreement will protect both you and your tenant. It gives both parties a reference point for answers should an issue or dispute arise. This can help you avoid more expensive legal action. 

To make your written agreement effective, it needs to be thorough. Working with a property management service will ensure that your lease is legal, enforceable, and effective. 

Contact our experienced team of property managers today and let us help you secure written lease agreements. 


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