Top 5 Lease Clauses Landlords Regret Not Including

By Bethany Laflam

As a securities attorney who’s reviewed and structured thousands of multifamily real estate deals, I’ve seen what happens when things go sideways, especially when you’re scaling with Other People’s Money (OPM). And while my legal focus is on SEC compliance, I’m also a real estate investor myself. I know firsthand that protecting investor capital isn’t just about legal documents, it’s about operational decisions, too.

One of the most overlooked areas of legal risk? The lease agreement. A lease is more than a rental formality, it’s your frontline legal defense. And when you’re using OPM, a weak lease isn’t just a landlord mistake. It’s a fiduciary failure.

Here are the top clauses landlords regret not including and why you should care if you’re building wealth on the back of someone else’s capital.

STEP 1
INDEMNIFICATION THAT ACTUALLY WORKS
Vague or generic indemnification clauses might sound official, but they often fall apart in court. If a tenant causes injury or property damage, your lease needs to clearly shift liability away from you and by extension, your investors and partners. I had a client get sued after a tenant hosted an unsanctioned event that resulted in injuries. The lease included standard language, but it wasn’t specific enough. Insurance coverage got messy, and investor trust was shaken. Custom language would have changed the outcome.

STEP 2
CLEAR MOLD, PEST, AND LEAK REPORTING REQUIREMENTS
Mold claims can be brutal and expensive. I’ve seen operators get sued over health issues when tenants failed to report leaks. The problem? The lease didn’t make reporting mandatory. When you’re using OPM, delayed response = potential negligence. Your lease must require tenants to notify management in writing of leaks, pests, or visible mold immediately. It’s a simple line that can save you six figures in legal fees and remediation costs.

STEP 3
A HARD “NO” ON SHORT-TERM RENTALS
Unauthorized Airbnb use is more common than most operators realize—and more dangerous.
From party damage to city code violations, the ripple effects can threaten your property, your
projections, and your credibility. If your lease doesn’t explicitly ban short-term rentals or subleasing without written approval, you are vulnerable. And when OPM is in play, reputational risk can hit just as hard as financial risk.

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STEP 4
ATTORNEY’S FEES AND COLLECTION COSTS
Winning a legal dispute is great unless you’re stuck paying the bill. Your lease should clearly
state that you can recover attorney’s fees and costs if the tenant violates the agreement.
I’ve seen clients spend thousands on eviction and still take a financial hit because their lease did not include this provision. When investor returns are involved, that kind of loss matters.

STEP 5
EARLY TERMINATION CLAUSES AND LIQUIDATED DAMAGES
Unexpected vacancies can wreck projections, especially during key periods like refinancing or
sale prep. Without a clause that outlines penalties or fees for breaking a lease early, you’re at the mercy of the market. One client’s cash flow cratered after a tenant exited unexpectedly. No liquidated damages clause meant no recourse—just another reason for capital partners to get nervous.

IF YOU’RE USING OTHER PEOPLE’S MONEY (OPM), THE STAKES ARE HIGHER
When you’re raising capital from others, whether formally through a syndication or informally through a JV, you take on more than just financial responsibility. You take on legal and ethical responsibility to protect that money. That means your lease isn’t just a management tool. It’s a risk mitigation strategy. It affects cash flow, liability, investor trust, and your ability to deliver. And even if you outsource property management, you are still accountable. Passive investors should care, too. Don’t assume your sponsor or operator has it handled. Ask to see the lease template. Ask who wrote it. Ask what protections are built in. Because when things go wrong, legal documents are the first line of defense—and the first thing everyone reviews in hindsight.

FINAL THOUGHT: A $20 CLAUSE CAN PROTECT A $2M DEAL
You’ve gone through the work of raising capital, structuring your deal, and building a business on trust. Don’t let all that crumble because of a vague clause in a lease. Strong leases aren’t exciting, but they’re essential. And when you’re playing with OPM, they’re not optional.

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