Vacation Rental 101: Rental Agreement

Astrid LindstromLeave a Comment

You’re almost ready to rent out your second home! You have the proper licenses and fees filed, you’re set up to collect vacation rental taxes, and you have insurance coverage. It’s time to start getting some tenants in the property – but just like a long-term rental, you’re going to need a lease agreement for your guests.

Short-term rental leases (generally referred to in the vacation rental industry as “rental agreements”) lay out the terms of the tenant’s occupancy and ensure that you’re both on the same page with regards to what is and is not acceptable in your property.

We want to start with this important PSA: you should always, always, ALWAYS consult an attorney when creating any legally binding document.

We’re going to cover in general terms what your rental agreement should and shouldn’t include so you can go to the attorney with a clear list of what you’d like included in the formal document. This is a guideline for your personal preferences; your lawyer will be the best person to ensure your general terms, payment terms, and liability are spelled out in the correct legal language.

Protections

Remember just a moment ago, when we said you really do need a lawyer? This section is why. We’ve included a brief explanation of what each of these protections is and why you need it, but your lawyer needs to create the language that will actively protect you. Your rental agreement should include:

  • Booking Transaction Terms. This section explains exactly who the tenant is paying the fees to and who is liable in case of dispute.
  • Payment Terms. This section clarifies what payments are due and what percentage of the payment will be returned to the tenant in case of cancellation.
  • Damage and Insurance. This section will reiterate your liability and your guest’s liability in case of damage to the property or injury to the renter or their guests.
  • Cancellation Terms. This section specifies under what circumstances you can cancel a renter’s stay – usually in the case of unforeseen damage to the property.
  • Indemnification and Hold Harmless. A standard inclusion in most leases, this protects you in the case of a guest’s injury, damage, loss or theft.
  • Attorney’s Fees and Costs. This section clarifies that if a guest takes you to small claims court and loses their case, they are liable for your legal fees.
  • Disputes. In the case of a chargeback or refund demand, this section should clarify what a guest must do to prove you failed to live up to your end of the agreement.

It’s likely none of your tenants will give you any trouble and you’ll never need any of the protections above – but they’re good to have just in case.

For the vast majority of the day-to-day operations of your vacation rental, however, you and your tenant will be largely concerned with the details in the following sections, which cover what they can expect from you as a host, and what you expect of them as guests.

Name of Tenant and Dates of Occupancy

In a long-term lease, one of the most important things to do is lay out the names of the tenants and their dates of occupancy. For short-term rental agreements, it’s a little more flexible, and for good reason: the dates and the names of some of the guests can easily change between the time the property is booked and the time the guests arrive.

If you’re using an online booking platform like VRBO or Airbnb, you will be prompted to provide your rental agreement when you sign up, and your lawyer can ensure that your rental agreement legally binds the renter to the terms of the agreement when they make the booking. This means your rental agreement won’t include the name or dates on the document itself; it will be connected to the booking where the renter agreed to the terms.

If you choose not to go through an online booking platform, it may give you peace of mind to have a formally signed document each time. Be prepared to accept these agreements by email – fax machines are uncommon, and waiting for each agreement to arrive by mail may not be practical.

Rental agreements are pretty short – 2-3 pages – which makes the file easy to send and receive through your usual email address. Ask for your attorney to give you the final version of your rental agreement in a PDF format, which is easy to send and to print but can’t be altered by the renter.

Check-In and Check-Out Times

Your rental agreement should specifically state your official check-in and check-out times, and lay out what the consequences are for failing to comply. You can state in writing that you consent to guests staying late or arriving early, but your agreement should include the times you want the majority of your guests to arrive and depart.

For a property that has a lock-box, a late arrival may not inconvenience you and you may decide you don’t need a formal check-in time. If you will be handing over the keys in person, provide a check-in time so you can schedule that time in advance. You can charge a fee if the renter is late or needs you to be available at a late hour – though this is at your own discretion, and we’d recommend being kind to your renter whenever possible.

Check-out times are important as well, particularly if you have a quick turnover for the next guest. Be sure to specify what the consequences for failing to check out on time are, and give yourself at least two hours’ leeway before you absolutely must have the guest out of the house. That way, even if a guest is late, you’ll still have time to clean the house for the next guest’s arrival.

House Rules

Your rental agreement should clearly stipulate any house rules you may have, such as “no smoking” or “no pets.” This is also a good place to let your tenants know about any local or property regulations that will affect them, such as noise restrictions or rules about hanging wet towels on the balcony.

Your should also clarify your responsibility for any items in your house that might cause damage to your tenants – for example, if you have a pool, you can state that tenants are responsible for pool safety. Again, your lawyer is the best person to ensure your legal protection here.

Maximum Occupancy

Be sure to include your maximum occupancy! This is your safeguard against guests who claim they are only bringing 6 people when in fact it is 6 adults and 2 children, or guests who host parties on your property. Maximum occupancy applies to all guests, including visitors to the property, and can be enforced at your discretion.

Most of the time, you’re not likely to mind if your party of 6 guests has two friends over for lunch, and you can turn a blind eye to such occasions. Maximum occupancy will ensure that you have the ability to stop more egregious behavior when it occurs, however, and it’s best to include it in your rental agreement. 

Fees and Additional Services

If you have any fees that are optional (such as a pet fee or a fee to turn on the pool heat), be sure to include them in your rental agreement. You can also include additional services such as catering or concierge services in this section, with clarification that there is an extra fee for these services not included in the booking rate.

Cleanliness

Lay out the expectations the tenant may reasonably have for your rental’s cleanliness and your own expectations for the condition in which the guest will leave the property. Be reasonable on both counts; your guest will generally be willing to strip the beds and put dishes in the dishwasher, but you cannot expect the guest to leave your house in guest-ready condition for the next arrival.

Maintenance

Use this section to explain what you expect tenants to do if there is a maintenance issue and how you will respond. You want them to know you will respond promptly if they use the correct channels to contact you, and spell out how best to do so.

Host Access

Be sure to include this one! You may need to access the property while the guest is in residence for a number of reasons, and your lawyer will need to ensure your rental agreement states you have the right to do so. You should also specify what kind of notice you will give the guest if it becomes necessary to enter the property.

You need this section even if you only intend to enter the property with the guest’s consent. If the guest complains that the fire alarm started chirping last night and you arrive to fix the problem the following morning while they are at breakfast, you may still get formal complaints. You need the right to enter your property in an emergency; just be sure to only use it when necessary, and to get guest consent nonetheless.

Falsified Bookings

Everyone’s heard a horror story about a renter who threw a party and destroyed the property. The falsified bookings section is how you can prevent those renters from ever getting into your property in the first place – or get them removed very promptly on arrival.

This section says that if your booking was made under false pretenses – a false name, a renter claiming to be 25 when they’re really 21, bringing 20 people when they said they were bringing 10 – you can evict them immediately and are not responsible for returning any amounts paid.

Make Your Rental Agreement Yours

We’re big believers in individual rental agreements for each property and each owner. We manage over 2,000 properties across North America, and while we have an excellent standard rental agreement (which you’re welcome to reference as a baseline guide for creating your own), we encourage our owners to add custom terms to help ensure their properties are treated with respect.

A pet-friendly rental in Boca Raton can and should have a very different rental agreement from a cabin in the California redwoods with lots of fire safety rules. Your vacation rental shouldn’t be “one size fits all.” Make your rental agreement right for your property, your renters, and your neck of the woods.

Got questions? Ask them in the comments!

This post is part of Evolve’s Vacation Rental 101: The Expanded Ultimate Guide to Success series, where we discuss the ins and outs of vacation rental ownership for newcomers and experienced veterans alike. Tune in next week for our 101 post on how to schedule time for running your vacation rental business.

To be sure you don’t miss a post, download the Ultimate Vacation Rental Success Guide below and we’ll send you an email notification every time we publish a new 101 article. Have questions or want to know how we make vacation rental ownership easy and profitable? Call our Homeowner Consultants at 877.818.1014 (press 2) or click here to learn more about Evolve.