What Policies Should You Include in a Residential Lease?

No two rental agreements are the same.

This is because each property and landlord have individual needs, priorities, and specifications. 

Your rental agreements should reflect these needs. However, they should also adhere to state and federal laws, which restrict and sometimes dictate which policies you can legally enforce.

So which policies should you include in a residential rental agreement contract?

Here are a few of the most common rental policies among residential leases.


The most important policy to establish up-front in your lease is rent.

What is your rent policy? Your rent policy portion of your lease should include the following:

  • The rent rate
  • When rent is due
  • Where rent is due (at your office, on a rent collection platform, etc.)
  • Which forms of payment you accept
  • Whether there are any grace periods for rent

Remember that in many states, grace periods are mandatory and determined by state statutes. Some states also require you to accept at least one form of payment that isn’t electronic. Make sure you’re aware of these laws before you enforce your own policies.

Late Fees

In addition to your rent policy, you should also clarify your late fee policy. Do you charge late rental fees? How much is the fee, and how many times can it be applied? 

What about the amount of the fee? Are late fees a percentage of the amount owed, or a flat rate?

Late fees are also commonly regulated across the states. Many states have limits on late fee amounts, typically around five to 15 percent of monthly rent or a “reasonable” amount. Landlords also can’t charge late fees until any mandatory grace periods have passed.

Security Deposits

Security deposit procedures can be some of the most confusing in a rental agreement.

Before allowing a new tenant to sign a lease, be sure they understand what the security deposit covers, the amount, and the fact that you will refund it (assuming no damages or unpaid bills) shortly after the tenant moves out.

State laws regulate security deposits heavily. Here are some of the most common regulations surrounding security deposits:

  • Amount limits (usually one to two months’ rent)
  • Deposit location
  • Maximum time to return
  • Acceptable reasons for withholding funds from the security deposit
  • Whether the landlord is required to pay tenants interest on their security deposits


Utilities are another policy that should be made clear in your residential leases. List which utilities are included in the rent and which are the tenant’s responsibility.

You should also indicate whether any utility costs are shared, or not metered separately for each unit. If this is the case, check whether your state requires you to disclose how utility costs are allocated across units.


If your tenants smoke, this can permanently damage your rentals. For instance, smoking can cause unsightly stains, yellowing walls, and stubborn odors. These damages are also dangerous, as thirdhand smoke can endanger the health of neighbors and future tenants.

If you want to avoid these damages, make it clear that smoking is not permitted in your rental units.

If you do allow smoking, remind your tenants that they are responsible for damages via their security deposit.


Data shows that most renters own or want to own pets. This means allowing pets in your rentals will give you access to a much wider applicant pool. 

If you choose to welcome pets (which you should!), you need a firm rental pet policy. It should include:

  • What kind of pets are allowed (Just dogs and cats? Fish? What about exotic animals?)
  • How many pets each renter may own
  • Which breeds, if any, are prohibited
  • Any size or weight restrictions
  • Tenants’ responsibility to clean up after their pets outside and in common areas
  • Tenants’ responsibility to pay for pet damages


Lastly, it’s important to indicate whether subleasing is permitted under your rental agreement.

Many renters aren’t interested in subleasing until they find themselves in a situation that makes it an attractive option: for instance, studying abroad, moving in with a significant other, or travelling for work. 

By laying out your policies and terms for subleasing in the lease, your tenants will know where to find information about it later.

If you do allow subleasing, it’s a good idea to require your tenant to provide you with the subtenant’s information so that you can generate a full tenant screening report. Also clarify whether the subtenant is required to sign a lease with you in addition to making an agreement with the original tenant.


Your rental policies are the backbone of your residential tenancies. Without them, you won’t be able to regulate tenant behavior, sustain your business, and ensure the future success of your properties. By covering each of the above policies, you can be sure to design a strong and lasting lease agreement.

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