How to Improve Lease Compliance

Lease violations are a constant struggle for nearly every property manager that we talk to, especially in single-family rentals. That’s why lease compliance is such a high priority.

Lease compliance isn’t just about repeating the rules over and over; it’s about creating systems that make it easy for residents to follow the lease every day. Rather than positioning yourself as an enforcer, you need to show that you’re working with your residents to make everyone’s life easier.

Lease compliance has a cascading effect on your business, because it:

• Reduces risk
• Prevents avoidable costs
• Protects NOI
• Reduces evictions
• Supports a healthier resident-property manager relationship

What is lease compliance, and why do properties struggle with it?

Lease compliance is when a resident fulfills the obligations and responsibilities laid out in their lease agreement, including paying rent on time, maintaining insurance coverage, changing HVAC filters regularly, following pet and occupancy rules, allowing access for maintenance, and more.

The most common points of failure for lease compliance are:

• Unclear clauses: When portions of the lease are written ambiguously, or in such legal jargon that a resident can’t understand them clearly.
• Poor onboarding: Residents often lack a proper onboarding process that walks them through the lease and the expectations that come with it.
• Lack of reminders: If a property manager doesn’t provide automated reminders for things like rent payments, filter changes, and maintenance issues, residents will often forget about them.
• Scattered records: If your office doesn’t have a clear record of what’s been done at which property, it makes it nearly impossible to enforce requirements across your portfolio.
• Reactive enforcement: Property managers should be proactive about lease compliance, rather than only enforcing with negative consequences and fees.

Fewer lease violations can significantly increase the net operating income of your property management company. It frees up time for your staff to focus on more strategic projects, and reduces the number of disputes you have with residents. Ultimately, proactive compliance management can decrease the number of evictions and non-renewals you have to manage.

How to create a lease agreement that residents actually follow

If you’re looking to increase lease compliance, the best place to start is the lease itself. Here are some tips for crafting a lease agreement that residents will adhere to:

• Use attorney-vetted templates: Leases are legal documents, so they should always be approved by an attorney. Meet with a lawyer in your area to make sure you’re following local and state regulations.
• Keep addenda simple: The longer a document is, the less likely a resident is to read it. If you can minimize addenda, that increases the chances that your residents will read, comprehend, and follow them.
  • This is especially true for things like renters insurance requirements, pet restrictions, utilities, pest management responsibilities, and air filter changes. Make sure that your addenda are short, clear, and to the point so that residents don’t have to dig through to find their obligations.
• Write in plain language: Wherever you can, make sure you define what’s expected of the resident and how often. Include information on how you’ll verify their compliance and what the consequences are for violations.
• Include disclosures and local requirements: Use clauses and addenda specific to your area wherever possible. Avoid including clauses or sections that conflict with each other. For example, don’t include a federal or state requirement if it’s superseded by local regulations.

Resident onboarding checklist: Set compliance expectations from day one

Starting off on the right foot is essential. Here’s a checklist for move-in day that will help everyone get on the same page:

• Send a digital copy of the lease so your resident has the full legal document at hand.
• Provide how-to guides for any property-specific items they’ll need, like how to change HVAC filters or winterize the hose bib.
• Offer clear contact information, along with whether email, phone, or a portal message is preferred.
• Give clear instructions on how to create a resident portal login, along with a deadline to get their account created.
• List out due dates and other obligation deadlines, like when filters need to be changed and when trash pickup happens.
• Give instructions on how residents should show proof of compliance. Make sure they know where to upload proof of insurance, how to submit evidence of filter changes, and how and when to schedule pest treatments or infestations.
• Provide a copy of the move-in condition report, along with clear guidelines and deadlines if the resident has any disputes.
• Deliver information in multiple formats, including one-pagers, screenshots, and short videos, so that all different types of learners can absorb the key points.
• Introduce the resident benefits package, like what services are included, whether they need to set up accounts or activate benefits, and how they can learn more.

Property management systems that maintain lease compliance

It’s important to build internal systems that support lease compliance at every stage. One of the most important pieces is to set recurring compliance checks and automate them through your property management software. You can set reminders for things like monthly insurance audits, quarterly filter change confirmations, seasonal maintenance access checks, and renewal checklists. You can also automate reminders and expiration dates.

Another important step is to standardize document formats and naming conventions so that you can more easily track and find key docs. For example, you might format all of your document names as Property_Unit_Resident_DocType_Date.

Finally, make sure that you’re tracking portfolio-wide KPIs so that you can identify gaps in process. Report regularly on insurance compliance rates, the average days needed to provide proof, the percent of on-time rent payments, the frequency of scheduled pest treatments, and the percent of filter confirmations. This way, if a KPI starts to slip, you can catch it early and make adjustments to improve compliance in that area.

Lease violation enforcement: step-by-step process for property managers

Of course, no matter how proactive you are, you’ll eventually face at least some compliance issues. Here’s our step-by-step guide for enforcing lease compliance.

1. Document everything: Make sure to date stamp any violation notices and other important communications. If you’re communicating via physical mail, use a delivery type that comes with delivery confirmation so that you have everything fully documented. Take photos of problem areas, including damage, dirty filters, or pest issues, and make sure your camera or phone has date and location metadata turned on. Finally, log and share call summaries with the resident so that even phone conversations are clearly documented.
2. Use graduated steps: Not all violations are equal, and you don’t always need to jump to fees and punishments at the first sign of trouble. Instead, start with a friendly reminder about lease terms. If nothing changes, send a formal violation notice in accordance with your local laws. Next, apply any relevant fees to try to motivate the resident into compliance. If that still doesn’t work, make sure they’re aware of the cure window and what will happen if they don’t correct their violations. Finally, your last option would be to proceed with an eviction.
3. Be specific and empathetic: In many cases, residents are just as stressed about a lease violation as you are. Remember that your residents are human, too, and approach communications with a level of compassion and professionalism. Give them clear steps they can take to remedy the situation, along with the deadline. Finally, make sure they know exactly how to provide an update to you once they have fixed the problem.

Lease compliance software: Essential tools for property managers

There are plenty of tools available on the market that can help with lease compliance. Some features might already be available in your property accounting software, while others will require additional tooling. Here’s what we recommend looking for in compliance software:

• Essential features: Make sure your tech stack includes a resident portal, automated reminders, document capture, insurance verification, task queues, and reporting. This level of technology makes it easier for residents to prove their compliance, and for your team to track it.
• Integrations: Your lease tracking software should sync seamlessly with your property accounting software, but it’s also important that it connects with your ticketing system for maintenance requests, and any communication automation tools you use. Finally, look for integrations with your internal communications tools like Slack or Microsoft Teams.
• Staff dashboard: The best tools include easy dashboards for your team and your company leadership to see portfolio performance at a glance. This should include all of the lease compliance KPIs that we covered earlier in this article.
• Resident dashboard: A status dashboard for residents to check their own compliance is equally valuable. It should quickly show what’s due when, and offer easy access to offer proof of compliance.

5 lease compliance problems the Resident Experience Platform solves

• Problem: Chasing proof of renters insurance across emails.
  • Solution: Automated insurance tracking in Second Nature’s RBP eliminates manual insurance compliance tracking. With 365-day per year tracking, Second Nature will immediately flag any residents whose policies lapse, and automatically enroll them in our master policy.

• Problem: Missed air filter changes create HVAC issues and access disputes.
  • Solution: An air filter delivery program delivers filters to your residents’ doors right when they’re needed. It serves as a physical reminder that it’s time to change the filter. Plus, each filter is date stamped, so you can know at a glance whether the resident has been doing their part.
    
    
• Problem: Unreported pest issues escalate and violate sanitation clauses.
  • Solution: On-demand pest control lets residents schedule directly with service providers, logs proof of treatment, and comes with a 30-day guarantee. Plus, there’s no cost to the resident at point of service for up to four service requests per year, so residents won’t procrastinate due to cost.
    
    
• Problem: Late rent and weak payment habits drive repeat notices.
  • Solution: Second Nature combines Resident Rewards and Credit Building to incentivize residents to pay on time, every time. Our Identity Protection service also helps protect their ability to pay.
    
    
• Problem: Scattered move-in tasks lead to missed utilities and early noncompliance.
  • Solution: Move-in Concierge centralizes setup, timelines, and confirmations. Resident Onboarding offers an in-depth, personalized walkthrough of the lease for each resident so that they fully understand their responsibilities.

Automate lease compliance with Second Nature

Clearer leases, better onboarding, and automated tracking all combine to deliver fewer violations and better renewals. With our Resident Benefits Package, things like insurance tracking, filter delivery, pest control, and utility setup are handled effortlessly, adding no work to your team. Resident Onboarding makes leases easy to understand so your residents know what their obligations are from day one.

See how you can see fewer violation notices, fewer expensive work orders, and higher renewal rates with Second Nature.