Disclaimer: This blog post is meant for informational purposes only and does not constitute legal advice. Consult with a licensed attorney in North Carolina for specific legal guidance.Â
One of the essential tools in a property manager’s toolkit is the lease agreement. It’s a contract that defines the terms of a renter’s occupancy, outlines responsibilities, and sets the parameters for the entire rental experience.
For property managers in North Carolina, understanding the nuances of these agreements can set you on a path for leasing success. This guide can equip you with that knowledge. Coupled with our free North Carolina sample lease agreement template accesible through the “Download Sample Form” button above, you can get a head start on signing more leases and bringing in reliable revenue.
What Is a North Carolina Lease Agreement?
A North Carolina lease agreement serves as a formal contract that solidifies the relationship between an owner and a tenant regarding the use of a specific property. By entering into this agreement, both parties are committing to uphold the stipulated terms and conditions throughout the duration of the lease. The agreement gives all parties a clear understanding of what is expected of them.
Should any disputes arise, the lease agreement also acts as a reference point. It provides legal protection for both parties, confirming that the rights of both the owner and tenant are upheld. Being a legally binding document, if either party fails to meet their obligations, the other party has the right to seek legal remedies.
In essence, a North Carolina Lease Agreement is more than just a rental contract; it’s a tool that promotes a harmonious relationship between owners and tenants by clearly outlining rights, responsibilities, and expectations.
Who Needs a North Carolina Lease Agreement?
The simple answer is anyone involved in the rental of residential properties, but let’s delve deeper:
Property Owners: Even if a property owner is not involved in day-to-day management, having a standardized lease agreement keeps their interests protected and ensures their properties are rented under terms they’re comfortable with.
Property Managers: They act as intermediaries between property owners and tenants. A well-structured lease agreement helps them manage the property effectively and address any disputes or concerns that may arise.
Tenants: A lease agreement is equally important for tenants. It offers them protection, clarity about their responsibilities, and a clear understanding of what they can expect from the property manager or owner.
Other Real Estate Professionals: While not directly involved in the property management aspect, realtors and other real estate professionals benefit from understanding lease agreements, especially when assisting clients in the rental market.
Types of North Carolina Lease Agreements
Different rental situations call for different types of lease agreements. Here are the most common types you might encounter in North Carolina:
Standard Lease Agreement (Fixed-Term Lease): This is the most common type of residential lease, often lasting for a set period, typically one year. It outlines the obligations of both parties for the duration of the lease.
Month-to-Month Lease: As the name suggests, this agreement renews every month. It offers more flexibility, since neither party is tied to a long-term agreement. Typically, either party can terminate the lease with a 30-day notice.
Week-to-Week Lease: Similar to the month-to-month lease but operates on a weekly basis. It’s less common but can be found in certain rental situations, such as vacation properties.
Lease with Option to Purchase: This type of lease gives the tenant an option (but not an obligation) to buy the rental property. The terms of the potential sale, including the price, are typically included in the lease itself.
Sublease Agreement: Allows the current tenant to rent out their space to a subtenant. The original lease with the property manager or owner remains in effect, and the original tenant is still responsible for paying rent and damages to the property, should they occur.
What Should a North Carolina Lease Agreement Include?
For property managers, having a comprehensive and state-compliant lease agreement can save a lot of headaches and legal trouble down the road. While the broad strokes of what this contract should include might seem obvious, knowing the details is the foundation of any effective lease agreement. Here’s what you should include:
Parties Involved
Any lease agreement should specify clearly who the involved parties are. There are usually two key parties:
-The Owner/Property Manager: This is the individual or entity offering the property for rent. The full legal name and address for notices should be provided.
-The Tenants: The individual or party renting the property. For all adult occupants, their full names should be listed, ensuring each is legally bound by the agreement.
Lease Duration Dates
This section of the agreement indicates the start and end dates of the lease. Most common is a fixed-term lease, usually spanning 12 months. It has a specific start date and end date.
Another popular option is a month-to-month lease that begins on a certain date but doesn’t have a specified end date. Instead, it renews every month until terminated by either party.
Rent and Security Deposit Information
Aside from parties involved and dates, you should also lay out the terms surrounding payment, including:
-Rent Amount and Due Date: Clearly state the monthly rent amount and the day of the month it’s due.
-Late Fees: If there are penalties for late payments, they should be defined clearly.
-Security Deposit: This amount, often equivalent to one month’s rent, covers potential damages or unpaid rents. In North Carolina, owners must return the deposit within 30 days of the lease termination.
Occupancy Limits
This section of the lease agreement defines who can reside in the rental unit. Specify that only parties signed on the lease (and their minor children) can occupy the property. Any other occupant, if allowed, would need written permission from the owner or property manager.
Property Management Company and Tenant Responsibilities
This section often has more detail. You’ll need to outline the responsibilities clearly so that both parties know what’s expected of them. For owners and property managers, this often includes major repairs, maintenance of common areas, and regular confirmation that the property meets health and safety standards.
Tenant responsibilities typically include paying rent, maintaining a clean environment, informing the owner of any damages or needed repairs, and adhering to the stipulations laid out in the lease regarding property modifications.
Pet Policies
Pets are important to many prospective tenants, but they can also become a contentious issue, so be as clear as possible about your pet policy.
If pets are allowed, specify which types and any restrictions on breeds, sizes, the number of pets or any other relevant criteria.
Many owners require an additional security deposit for potential damages caused by pets. It’s also typically a good idea to require basic pet screening at this stage.
North Carolina Lease Agreement Addenda and Disclosures
Beyond the primary lease document, numerous disclosures and addenda might be legally required or beneficial to include.
Here are the additional stipulations to include in your North Carolina lease agreement. This list is not exhaustive, so consult a legal professional if you’re unsure about what to include in your own agreements.
Lead-Based Paint Disclosure
For rental properties constructed before 1978, federal law mandates the inclusion of a lead-based paint disclosure. Both the owner and tenant must sign this disclosure, which informs the tenant of any known presence of lead-based paint hazards and provides the tenant with an EPA-approved pamphlet on lead poisoning prevention.
Security Deposit Receipt
In North Carolina, when collecting a security deposit, owners are required to:
-Provide a receipt (if the deposit is paid in cash).
-Specify the banking institution where the deposit is held.
-Provide a detailed list of any previous damages to the property.
Notice of Foreclosure
If a rental property is in foreclosure, the owner must inform the tenant. While not a traditional addendum, this disclosure is important. Not only is it ethical to keep tenants informed, but a failure to disclose this information can lead to legal penalties.
Optional Disclosures and Addenda
There are countless potential addenda that might be relevant, depending on the property and the agreement between the owner and tenant. Some popular optional disclosures and addenda include:
-Pet Addendum: Specifies whether pets are allowed, types of permitted animals, any associated fees, etc.
-Maintenance Addendum: Details the responsibilities of both parties concerning property maintenance
-Smoke-Free Addendum: Indicates areas where smoking is prohibited
-Early Termination Addendum: Details conditions under which the lease can be terminated early, including any penalties
The key is to tailor addenda to the unique aspects of the property and the owner’s specific concerns and stipulations.
Consequences for Excluding Mandatory Disclosures
Failing to include mandatory disclosures can lead to:
-Legal Action: Tenants might have grounds to sue for damages or to break the lease without penalty.Â
-Financial Penalties: Owners and property managers might face fines or penalties, especially concerning state or federal mandates such as the lead-based paint disclosure.
-Loss of Owner Rights: In certain cases, failure to disclose can limit an owner’s rights, including the right to withhold portions of the security deposit.
North Carolina Lease Agreement Laws and Regulations
Understanding the legal landscape surrounding lease agreements is just as important as knowing the details that go into those agreements. Having this knowledge makes compliance easier, reduces the risk of disputes, and fosters healthy owner- or property manager-tenant relationships.
Here are the key laws and regulations that property managers need to be aware of concerning security deposits, right of entry, grace periods, and late fees in North Carolina.
Security Deposits
The maximum security deposit owners can charge varies based on the length of the lease:
-Week-to-week lease: No more than two weeks’ rent.
-Month-to-month lease: No more than one and a half months’ rent.
-Leases longer than month-to-month: No more than two months’ rent.
Owners must keep security deposits in a separate, interest-bearing account in a North Carolina bank or savings institution. They are also required to return the security deposit plus interest within 30 days after the tenant vacates. If the owner needs to retain any portion of the deposit, an itemized list of deductions must be provided to the tenant.
Right of Entry
North Carolina does not have a specific statute detailing how much notice owners must provide before entering a property. However, 24-hour notice is commonly accepted as a reasonable practice. In emergency situations, such as a fire or flood, owners can enter without notice.
Grace Period
North Carolina does not mandate a specific grace period for late rent payments. Therefore, unless specified in the lease agreement, rent is considered late if not paid on the due date.
Late Fees
In North Carolina, the following fees are permissible by law:
-Initial Fee: owners can charge a late fee if rent is not paid within the five day grace period past the due date. The fee can be either $15 or 5% of the rental payment, whichever is greater
-Ongoing Fees: For every day that rent remains unpaid after the initial five-day period, owners can charge an additional $4 per day, up to $48.
-Limits: The combined late fees cannot exceed 10% of the total rental amount.
Taking the Next Steps with Your North Carolina Lease Agreement
For property managers in North Carolina, a thorough and legally compliant lease agreement is both essential for doing business, and an important foundation for successful leasing and operations long term.
Use the knowledge above to understand the nuances of lease agreements in the state to lay the seeds of a transparent and trusting relationship between you, your clients, and your tenants.
Once you’re ready, you can get started drafting your own lease agreements with our free North Carolina sample lease agreement template available through the “Download Sample Form” link above.