3.5. Leases
Leases can be found in the Tenant section of the software, under the tabbed panel "Leases". They are used to help you manage your rentals, especially in regards to your Rent Roll and so on.
STEP 1: Creating a lease
To fill in information for the Lease for the Tenant, go in the Tenants menu, click the tab Leases, then click New in the right side menu and enter the appropriate information.
STEP 2: Enter recurrent rent payment
Each time you create a lease, an Scheduled Accounting Entry, as well as a Scheduled Invoice and Receipt by default are automatically created and are recurring at the Frequency you specified in the lease (monthly for monthly rents, and so on).
In turn, the Scheduled Entries will create Suggested Entries at the appropriate times with pre-defined Advance Notice for you to Accept, Edit, or Deny in your Accounting board (see creating a scheduled entry in accounting for more details).
Although creating a Lease automatically creates Scheduled Entries for you they are not linked because of several reasons. For example the rent can be paid late, rents can be paid after a lease is completed, etc. As well some Tenants will transition to a month to month rent without a Lease, and therefore some people prefer to just keep the Scheduled Entries around rather than having to re-enter a new one manually. Therefore, when a Tenant moves out, you will also have to delete the Scheduled Entries.
As well, for the same reasons, editing a lease does not adjust the Scheduled Entries, or any other related entries for safety reasons. For example, if it did, editing a lease would then cause your previous Accounting Entries to also be edited, which is very likely wrong and could result in a lot of issues. Therefore as stated before, although Leases do create Scheduled Entries, they are not linked to the Scheduled Entries they have created.
This is also true if you change the Tenant's Status to Past because it's very much possible to have a past tenant still owe you monthly rents from an existing lease (for example a tenant that is no longer living there but still has some time left on the lease, or a parent leasing a unit for their college kid during the summer).
STEP 3: Renewing a lease
There are two steps to renewing a lease:
First you need to close the existing lease (Lease End Date). It is NOT advised that you edit an existing lease rather than close the current one and create a new one in the unfortunate case that you have to go to court and need your tenant's past lease history. Therefore it's important to keep the information from the previous lease and create a new lease as they renew their leases.
Secondly, because the Lease isn't connected to the Scheduled Entries, you will most likely want to delete the Scheduled Entry created from the previous lease. And as you're creating a new lease, new Scheduled Entries will be automatically generated for you for the new Lease.
If the Tenant is transitioning to a month to month Lease, then the most common method to record this is to create a new Lease with a Start Date but no End Date. This means the lease is ongoing, or month to month.
STEP 4: Increasing the rent
There are several ways to increase a rent in the lease, of which a couple are illustrated below.
In most cases, rental increases occur when leases are renewed, which means you can just create a new Lease. If this is not the case and the rent is increase midway through a lease, then the recommend solution is to break the Lease up into two separate Leases, one for each part of the rental amount.
If the tenant is renting on a month to month basis, it is likewise recommended that you end the previous month to month Lease and create a new Lease with the new rental amount. The biggest advantage of doing this is that you retain an accurate record of exactly what rental amount was paid when, should you ever need this information.
STEP 5: Pro-rated rent
The software tries to automate as best as it can the creation of the Scheduled Entries for you (Scheduled Accounting Entries, Invoices, and Receipts) based on the Lease information. However in some cases this automation will not work, such as when you pro-rate rents. In these cases you will have to delete the Scheduled Entries the software tried to create for you and manually create them yourself. As well, you'll need to manually create the first, and probably last, Accounting Entries, Invoices, and Receipts manually as they don't lend themselves to the Scheduled process very easily.
Therefore if you created a monthly Lease starting on the 11th, then all rents will be generated for the 11th because, and although this may not have been your intention, this is exactly what you've told the software to do. As such, the Scheduled entry will have been incorrectly generated and you will therefore have to delete it and create your own Scheduled Entry manually.
STEP 6: Late fees
The software offers the ability to set a fixed Late Fee for automatic late fee calculations in the Accounting system (see Creating a Scheduled Entry in the Accounting chapter for more details).