Sample North Carolina Lease Agreement
Sample North Carolina lease agreements can be found just about anywhere on the internet. The challenge for you as a landlord and property investor, is not knowing who prepared the sample North Carolina lease.
At Linchpin Property Management, we are fortunate to have an owner who is also an attorney. Realizing the situation many landlords without property management companies are in, we created this guide to North Carolina leases as a means to educate you as a real estate investor.
A sample North Carolina Lease Agreement is available for your use on our website.
While you may want to rush to download the sample North Carolina lease agreement, we think it is important that you read all of the information contained in this primer.
It may seem as simple as downloading the sample lease agreement, and rushing out to have your tenant sign it but, as a landlord or property investor who is managing your own property, it is important for you to understand the lease agreement fully.
Equally as important, is for you to have an understanding of the rules and regulations for leases.
Before you forget, or if you just want a copy of our Sample North Carolina Lease Agreement, you can get it emailed to you at the link below. Don’t worry, you won’t have to leave the page, and can continue reading.
The key points we will cover in this primer for the North Carolina Lease Agreement include:
- Challenges of drafting a lease agreement in North Carolina
- The term of the lease agreement in North Carolina
- Tenant identifying information in the lease agreement
- The Occupancy Clause in the Sample Lease
- Sample Lease Agreement Property Description
- Sample Lease Agreement Language For Rental Price
- Security Deposits and Fees in the Sample Lease Agreement
- The Sample Lease Agreement and Utilities
- Repair and Maintenance in the Lease Agreement
- Right of Entry in the Sample Lease Agreement
- Addressing Pets in the Sample Lease
- Restrictions and Policies in the Sample Lease Agreement
From a practical standpoint this is a lot of information to cover. While we attempt to give you as in depth look as possible, nothing can be a substitute for knowledge gained from practical experience.
As a landlord and property investor in North Carolina, we always recommend you continue learning, seek out mentorship from those with experience, and to higher a property management company if you feel like you want a more professional management experience.
Now let’s get started!
Key Point 1: Challenges of a Lease Agreement In North Carolina
Drafting a lease agreement for North Carolina properties can present a challenge for landlords and property investors. There are many sample lease agreements available for your use for your Fayetteville, North Carolina property. We have also included a sample lease agreement at the end of this blog.
While there is no requirement in North Carolina for you to even have a lease, it always makes sense to have one, as it will alleviate the courts from solely using the North Carolina statutes as a substitute.
Whether you are drafting your lease agreement from scratch, or using an example lease agreement you downloaded from the internet, there are some things that you should always include in your rental property agreement.
What Lease is Used for Residential Lease Contracts in North Carolina
In North Carolina, property management companies generally use the standard lease form made by the North Carolina Association of Realtors. This form is called Standard Form 410-T.
The benefit for the property management company using the standard form is that the property management company does not have to hire an attorney to make changes to the form. Additionally, it is a well known and used form throughout North Carolina.
The downside is that the form stays static for a very long time, and does not change with the times. At Linchpin Property Management, we provide our landlords and property investors with North Carolina lease agreements which are tailored to their specific needs.
We are the only property management company that can do this quickly, because we have an in-house North Carolina attorney that can legally alter the lease agreement. This service is free to all of our property management clients.
In it’s current form, the Standard Form 410-T is 8 pages long. These 8 pages, however, do not include the various addendums which are usually included in the lease agreement. The addendums are a separate entity, and is discussed in our Lease Agreement Addendum primer.
For purposes of this North Carolina Lease primer, all you need to know is that a lease addendum is an add on of clauses which essentially enhance or clarify items in the lease. Using addendums, you can make changes to the lease agreement, without having to alter the lease.
Addendums are usually executed at the same time as the lease, but can be attached at any point during the term of the lease. Language in the addendum, however, should include what is being modified in the lease, and also that the original lease minus the modified terms remains in effect.
Be cautioned however, the addendums cannot deny tenants of fundamental rights, nor can they conflict with the current law. If the addendum does either, it will be held to be invalid.
Key Point 2: The Sample North Carolina Lease Agreement Term
When you draft your North Carolina lease agreement, as basic as it sounds, you should include the term of your lease. In this section, when we refer to the term of the lease agreement, we are referring to the length of the lease.
Typically lease agreements will be month to month, 3 months, 6 months, or a year. Each lease term has advantages and disadvantages, but generally, they should fit your specific needs and desires. As a Fayetteville, North Carolina landlord and property investor, the important question is should you use month to month or term leases?
For purposes of this primer, we will define a short-term lease as one that is 6 months or less, and a long-term lease as being more than 6 months. As a property investor, you might consider anything less than a year as a short-term lease, but in the property management business, we start at the 6 month mark when we consider what is a long term lease.
At Linchpin Property Management, we generally negotiate year long leases, with other language that is favorable to the landlord.
There are many pros and cons of a long term lease for both renters and landlords. The length of the lease will depend upon the individual needs of the landlord, as well as those of the tenant.
What are the Benefits of a Long-Term Lease Agreement?
As a property owner drafting a lease agreement, you should consider the benefits of the lease agreement for the tenant. While you want the contract to be on your side, consideration of the benefits for the tenant of your rental property should also be at the forefront.
From a tenant’s perspective, a long-term lease agreement offers more stability.
This makes sense, the longer the term, the less likely the tenant will have to look for a new place to lease. Additionally, this gives the tenant a sense of ownership, and more of a willingness to make the place their own.
The financial benefits of a long-term lease agreement are also apparent for the tenant. It is customary for landlords to increase the rental agreement rate for tenants who are on a short-term lease. This makes sense, because the stability of income for the landlord is less during a short-term lease period.
Along similar lines, the fact that you offer a long-term lease for a tenant means you gain a consistency of income. As a property investor, your concern is always to protect your bottom line. A long-term lease agreement enables you a consistent monthly revenue stream for a longer period of time.
Long-term lease agreements also give you less of a need to have to go through the administrative process for bringing in a new tenant. Administrative work can really be time consuming, taking you away from other tasks which can increase your revenue.
Administrative challenges include preparing your property for the rental market; marketing your property; finding and screening tenants; and conducting the move in and move out inspection.
As you can imagine, the financial loss in terms of the cost associated with marketing the property, cleaning, and the loss revenue from a vacant property, can be pretty substantial. Remember, if your property is empty for one month, that’s one-twelfth of your profit over the course of a year.
With a long-term lease, the tenant is able to negotiate with you as a landlord for a reduction in rent, you gain stability, and both parties benefit. It’s a win-win for both the property investor as well as the tenant.
Drawbacks of a Long-Term Lease Agreement
While there are benefits to a long-term lease agreement, the biggest of which is the economic stability, there are also drawbacks.
A long-term lease agreement with a tenant will more than likely present some hurdles for the sale of your property. This is especially true if you are selling your property to anyone aside from a property investor.
Property investors look to buy properties that will turn a profit quickly. A property investor may be willing to buy your property if the rental property has a long-term tenant in place. In this situation, a long-term tenant is appealing because there is a stability of income for the investor.
On the flip side, a buyer looking for a house that is occupied by a tenant may be less willing to buy your property. Depending on when the buyer wants to move in, a long-term tenant could prove to be a hassle.
As a property owner with a tenant in place, you have to remember you are still obligated under the lease agreement. What this means is that you have to abide by the remainder of the lease agreement until it expires.
While there is no prohibition to renegotiating the lease agreement, you have to be prepared to pay the cost for negotiation.
It can be expected that tenants who could be displaced, will go through a lot of inconvenience. What this means, is that in order to get out of the lease, you may have to compensate the tenant for their troubles. This can be done by compensating the tenant for the remainder of the lease agreement.
Another downside to a long-term lease agreement is potentially getting stuck with bad tenants. A tenant that has been a good tenant at first, may turn into a nightmare. We call this the Jekyll and Hyde effect, and we have seen it happen again and again.
If you end up with a bad tenant, you might want to start the eviction process sooner rather than later. If you wait, the problem might not get any better. Additionally, it may cause you a missed opportunity to get a better tenant. This is especially true if you can assess that your property would be in high demand.
The eviction process can be complex, and many landlords and property management companies do it incorrectly. If you are unsure of how to evict a tenant in North Carolina, you can download our guide that provides you with the forms and walks you step by step through the process.
Both long term and short-term rental agreements have their pros and cons. The decision as to which type of lease agreement to sign with your tenant is more or less conditioned upon what your goals are as a property owner and investor.
Key Point 3: Tenant Identifying Information as Contained in the Sample Lease Agreement
In the sample North Carolina lease agreement, you will see that there is space to identify all parties to the lease agreement. The relevant parties include the tenant, you as the landlord and, if you have one, your property management company.
At Linchpin Property Management, we believe that this identifying information isn’t enough. As a property owner, you want more information in case something goes wrong between you and the tenant. You want to be able to identify the tenant specifically if a dispute arises, and also be able to readily locate the tenant.
Time and time again, landlords who manage their own property are stuck with the bill when they are unable to locate tenants after either evicting the tenant, or after the tenant has vacated the property unannounced.
What you don’t want to do is having to end up trying to find your deadbeat ex-tenant.
Our recommendation is to be as detailed as possible.
When listing names on the lease agreement, use those names contained on the tenant’s government issued photo identification. Don’t accept nicknames, initials, etc. Use the full name in the lease agreement.
Additionally, and this can be in the addendum, gather contact information for next of kin, as well as other people who can locate the tenant after the lease term is over. This provides you with added ability to locate the tenant if it becomes necessary.
To some, the language in the sample lease agreement might seem like overkill. This is true, because it is not necessarily required to form the rental agreement contract. In fact, as we stated earlier, North Carolina law does not require a lease agreement at all. But in our opinion, it is a best practice to protect the landlord.
All Tenants of Competent Age Should Be on the Lease
Another important practice point, is to identify ALL tenants over the age of 18 who will occupy the property. This is very important, as you want to be able to enforce the terms of the lease against all occupants of the property.
Enforcement does not only include collection of the rent. Ensuring all tenants are on the lease enables you to start eviction proceedings if any of the tenants violates the lease. This is a power check on tenant conduct, and can prevent you from headaches later on.
Key Point 4: The Occupancy Clause in the North Carolina Lease
Along similar lines, it is good practice to also add an occupancy clause to your lease agreement. Our sample North Carolina lease agreement provides you with an example. As the name suggests, an occupancy clause limits who can occupy the property.
Generally speaking, the limits to occupancy will include adults listed on the lease agreement, as well as minor children. Limits should also be in place as to the number of days a guest may stay.
Occupancy limits give you power to exercise the right to begin eviction proceedings if the tenant violates the terms. Some common scenarios include if the tenant moves in an unapproved occupant, or attempts to sublease your property.
As a landlord, you want a readily available enforcement mechanism.
Key Point 5: Sample Lease Agreement Property Description
The sample lease agreement provides you with some information on how to properly identify the property. Most real estate property owners only include the address of the property. In theory, this is enough to identify it for purposes of the lease.
Although good, let’s take this a step further.
Some of the other key points you may want to consider putting in your lease agreement include:
- Any other real property that is on the property. Remember, real property is property which has been permanently attached.
- Any personal property that the landlord will leave behind, that the tenant assumes responsibility for. Remember, the tenant should assume responsibility, the landlord cannot merely push it on the tenant.
- Any specific storage for the tenant. While more common in apartment or condo units, it can be equally applicable in residential property management. A landlord may have a storage shed on the property. Is that storage shed for the use of the tenant, or exclusive use by the landlord?
- Any assigned parking for the tenant. Again, this is not necessarily an issue with single family home lease agreements, but it is common in condominium and apartment rentals.
- Any property that is off limits for tenant use, and not a part of the lease agreement. Think about a lease agreement for an in-law suite on a 40 acre lot that also includes the main house. The intent was to rent the suite, but the tenant later claims they should also be able to enjoy use of the house.
An important point to remember is that the property description for the lease agreement is not the same as the property description you write for a listing description.
Key Point 6: Sample Lease Agreement Language for Rental Price
The sample North Carolina lease includes the best practices for specifying rental amount. While placing the amount of the monthly rent may seem like enough, it falls short of what you would want to include in a lease.
To remain clear, your lease agreement should include the What, When , Who, Where, and How of rental payment.
- The What of Your Lease Agreement: What is the amount the tenant is expected to pay?
- The When of Your Lease Agreement: When is the tenant expected to pay the rental amount, and what is the late day.
- The Who of Your Lease Agreement: Who is the receiver of the payment. Is it you, or the company you formed (you did form an LLC to manage your real estate property didn’t you?)
- The Where of Your Lease Agreement: Where is the payment to be made. Is it an electronic payment, or is it sent or hand delivered to your office?
- The How of Your Lease Agreement: How do you want to be paid. Is the form of payment cash, check, money order, credit card, or some form of bank transfer.
In addition to specifying the rental amount and method of payment, you should include any types of fees associated with the payment of rent.
Fees don’t only include late fees, but also can include administrative fees. As a property investor, you should seek to pass on as many fees to the tenant as possible including, but not limited to, charges to processing the rental payment, as well as taxes on your rental property. We recommend, however, that these charges be factored into your rental rate, as opposed to making them separate line items.
Key Point 7: Security Deposits and Fees in the Sample Lease Agreement
The sample North Carolina lease agreement provides you with details on how you should collect, and provide notice of, the security deposit. Security deposits, and the landlord’s lack of compliance with the lease and the law, often get landlords in trouble.
On the surface, as a landlord, you may think that properly taking care of the security deposits means merely collecting the money from the tenant, but there is more to it than that. It is a must you learn how to handle security deposits in North Carolina.
Some keys to remember are that you should set forth the following essential items:
The Amount of the Security Deposit.
The amount of the security deposit. The maximum dollar amount you can charge for a security deposit under the lease will depend on how long your lease term is. Generally, for a week to week you can charge two weeks rent; month to month you can charge up to one and one-half month’s rent; and if longer than three months, you can charge up to two month’s rent. You can also charge a non-refundable pet deposit.
How The Security Deposit Will Be Used.
While we may think of using the security deposit for damage to the rental property, there are many situations where you may be able to withhold all, or a portion of the security deposit. Your lease agreement, or addendums, should spell out when you contemplate withholding a portion of the deposit.
Some common reasons recognized under North Carolina security deposit law include:
- Unpaid rent that is due
- Unpaid utility bills
- Court cost associated with an eviction
- Associated costs for having to rent the property again
- Expenses incurred as a result of storing or removing your tenant’s property
- Damage beyond normal wear and tear
- Any bills that the tenant has accumulated which could cause an adverse lien or interest against the property.
Whether The Tenant Has A Duty to Replenish the Security Deposit
Assuming you have to use money from the security deposit for valid legal purposes, you should include language in the North Carolina lease agreement that the tenant has a duty to replenish the funds.
In addition to language of how the security deposit will be replenished, your lease agreement should also include a date by which you expect performance. As a landlord, you don’t want the lease to expire, the tenant has moved out, and now you are stuck with expenses that are not covered by the security deposit.
When Will You Return the Security Deposit.
The lease agreement should include language as to when you will return the security deposit. Returning the security deposit is another area where landlords end up falling short when it comes following the sample lease provided, or failing to follow the laws related to security deposits in North Carolina.
In order to keep yourself out of hot water, there are some important considerations for you as a landlord when it comes to returning the deposit.
First, North Carolina law states that you must return the security deposit to your tenant within 30 days after the tenant vacates. This requirement is based upon you being able to calculate any costs you wish to deduct from the security deposit in that time frame.
Second, if you are unable to calculate the charges to the tenant within 30 days, you can take up to 60 days to return the security deposit to the tenant. You must, however, still provide the tenant with an estimate of charges within 30 days, as well as an itemized list of all damages and deductions at the 60 day mark.
In the event the tenant does not provide you with a forwarding address, you are not allowed to immediately take control of the remaining funds. The tenant has 6 months in order to exert their right to the security deposit.
It is a good idea to write a security deposit return letter to your tenant when you return the deposit. In this letter, you will identify, as mentioned above, the specific damages, as well as violations of the specific lease terms. This will provide you with the legal basis as to why you are withholding all or part of the deposit.
At any rate, you should spell out all of these conditions in your North Carolina lease agreement. This will ensure there is clarity in regards to the return of the security deposit, as set forth in the sample North Carolina lease agreement.
How You Should Store Your Security Deposit
Storing the security deposit is another area where you as a property owner could end up in hot water. In your lease agreement, you should note exactly where the security deposit will be held.
THE SECURITY DEPOSIT SHOULD NOT BE HELD IN YOUR PERSONAL BANK ACCOUNT, OR BUSINESS BANK ACCOUNT.
In North Carolina, security deposits must be held in a trust account IN THE STATE OF NORTH CAROLINA. North Carolina State law mandates that the bank must be licensed, insured, and physically present in the state.
This issue comes up a lot with some of our property investors in Fayetteville, North Carolina, as they deposit the funds in a USAA account. The funds must be deposited in a bank in North Carolina.
There is, however, an exception to this rule. A landlord can deposit funds into a separate account outside the state, if the landlord posts a bond. What is required, is that you must post a bond for the amount of the security deposit, and the bond must be insured by a company authorized to do business in North Carolina. Only then, may you deposit funds in a trust account outside of North Carolina.
No matter where and how you store the security deposit, there are two things that must be addressed in your lease agreement. The bank that is holding the deposit, and the fact that the deposit is not in your personal or business bank account.
Failure to follow any of these security deposit laws, in addition to failing to provide notice in the lease agreement, are grounds for a tenant to sue you under the North Carolina Tenant Security Deposit Act.
Key Point 8: The Sample North Carolina Lease Agreement and Utilities
The sample lease agreement includes language as to who is responsible for the payment of utilities. While this may seem like common sense, if the lease agreement is silent on certain utilities, you as a property investor may end up footing the bill.
Utilities such as electricity, water, and cable ,aren’t the only things that should be included. As a property owner, you should look at all the costs associated with the property, and include them in the lease agreement. These include trash collection, sewage, recycling costs, or any fees that might be imposed by an HOA.
Passing on fees is not illegal in North Carolina, and you can either itemize them specifically in the lease agreement, or include them as a built-in expense into the price of your rental investment property. We always recommend pricing recurring payments, like property taxes, into the lease rather than itemizing them.
As we stated earlier, however, you don’t necessarily want to include them as line items. Use the amounts as a cost you factor into the overall property rental rate.
Key Point 9: Repair and Maintenance in the Lease Agreement
Maintenance and repair are additional hot topics you must include in your North Carolina rental agreement. Being clear is necessary as a means to ensure you are able to collect for any damages at the conclusion of the lease agreement.
You must remember that you can’t blow off your landlord duties to repair and provide maintenance, as required under North Carolina Landlord Tenant Laws.
Some things to consider as key points to put in your lease are:
- The tenant’s responsibility to maintain the property in a clean state. This may seem like a no brainer, but unfortunately not having it in the lease can cause a big problem. While we would like to think that all tenants will be clean, this isn’t true. While you don’t want to mandate a tenant keep the property like a museum, there should be a minimum standard that should be met.
- Notification of defects or dangerous conditions in the property. There are a couple of reasons you want to include this provision in the lease agreement. The first is because you want to be kept up to date on things in your property that need to be repaired. Second, dangerous conditions on your property can lead to liability issues.
- Restrictions on tenant repairs and alterations to your property. This is an often-overlooked area in lease agreements. The thing is, you don’t want issues to come up with tenant repairs and alterations after the fact. In the sample lease agreement, you will see our guidance on how to craft tenant restrictions in your leases.
Key Point 10: Right of Entry in the Sample Lease Agreement
A right to entry provision is a must have in North Carolina leases. While North Carolina doesn’t mandate the landlord provide a specific amount of time to give notice prior to entry, we believe it is a good idea to include a right to entry provision in the lease agreement.
In North Carolina, the notice you provide to your tenant has to be reasonable. While there is no time frame, we recommend that in your North Carolina lease, you provide the tenant with at least 24 hours notice prior to entry.
In the sample lease, you will see that it is silent on the amount of notice you are required to give your tenant. It merely identifies certain conditions for which the landlord may enter the property.
In our opinion, as stated earlier, you should provide at least a 24 hour notice. Some tenants may feel “violated” by your entry into the property, and attempt to sue you for an invasion of privacy, or illegal entry. Additionally, a tenant may also decide to vacate after the lease has expired, because of a lack of notice.
As a point of practice, you can assign different notice requirements for different needs of entry. For example, a maintenance notice might be different than a notice of an impending property inspection. Along similar lines, you should note in the lease the waiver of a reasonable notice requirement for emergency repairs.
Key Point 11: Addressing Pets in the Sample Lease
Your lease needs to include your pet policy. What you can add to the pet clause is almost unlimited, but there are a few things we recommend you include in your pet clause.
- Whether pets are allowed at all. This may seem like a no brainer, but you need to include if you are going to allow pets in the property.
- Whether there will be a pet deposit. Specify the amount of the pet deposit. Also, consider whether there will be a monthly fee for the pet to stay in the property.
- Is the pet deposit refundable? We would highly recommend charging at least a portion of the pet deposit as nonrefundable. Our recommendation is based on the fact that, at a minimum, you are going to want to have a more extensive cleaning for the per once the tenant vacates.
- What type of pet will you allow? As a property owner, you can restrict the breed and type of animal in the lease agreement. Don’t think about limiting just dogs and cats, remember there are lots of other animals a tenant might have. This is not, of course, taking into account any federal, state, or local laws making breed restrictions illegal.
Similarly, you should also limit the number of pets in your lease agreement, or else you may end up with a tenant with 500 snakes living in your property.
Key Point 12: Restrictions and Policies in the Sample Lease Agreement
When thinking about restrictions and policies that you want to include in your lease, a good starting point is to consider things that would cause you to evict a tenant. You can leave policies like rent payment, and pets out of this section of the lease agreement. Those policies will be covered elsewhere in the lease.
Another consideration is that you don’t have to include every little thing in the lease. What we recommend is that you be general in your lease agreement. Save the specifics for anything that needs clarification. It’s always easier to enforce a general, non-ambiguous provision, as opposed to a specific provision. This is because the more specific you are, if the conduct does not fall under the specific clause, the tenant may have a way out.
Some restrictions you might want to consider including in the lease agreement are:
- Restrictions on illegal and criminal activity. You don’t have to detail the specific illegal activity, and a general clause prohibiting it is enough.
- Prohibiting smoking in the rental property. Another good restriction is smoking. While not an illegal activity, the lease agreement doesn’t have to only include illegal activity restrictions. Smoking in your rental property will cause you headaches, including the need to deodorize, paint, and deep clean the entire property.
These are just some of the considerations for you as a landlord when you are looking at drafting your North Carolina lease agreement. These considerations do not represent the entirety of the provisions that can be included in the lease.
If you have any questions, please feel free to reach out to us, we are here to help.
You can download a sample North Carolina lease agreement at the link below.
Also, make sure you sign up for our Landlord Academy. We provide free resources for you, as well as weekly tips, to keep you on track to becoming a successful real estate investor.
The Team at Linchpin Property Management.
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