Some landlords operate on oral leases or agreements with their tenants. While there is technically nothing illegal or "wrong" about this, you should be aware of the risks associated with it. As a landlord, having a written contract is very important if a dispute arises between you and a tenant. Here are some of the major reasons a written agreement helps to settle disputes:
1. Payment schedules
In any landlord-tenant agreement, deciding on a payment amount and schedule is vital. You need to spell out exactly how much you charge and the dates you expect those payments. It's also wise to include whether or not there is a grace period for late payments and what happens if a tenant ever misses a payment. By explaining this in writing, you are protecting yourself from the possibility of future dispute or confusion.
It also allows you to keep holding tenants responsible for payment if they move out early, if your lease has a specified length of duration. This way, you will not be underpayed and will have a clear way to deal with missed payments or attempts to manipulate the agreement.
2. Rules of the property
Before you rent or lease property to anyone, you need to clearly state the rules of the property and the penalties for violating them. This can be anything from your policy on pets to whether smoking is allowed to what happens if neighbors complain about a tenant's noise level. If you do this orally, rules could easily be forgotten, misunderstood or a disagreement could arise about how a situation should be handled if a violation occurs.
Even if it's unintentional, damages do happen in leased/rented property. You need to decide how you will handle incidents of property damage, including who is responsible for repair costs. You need to make these terms very clear to your tenants. Generally, landlords have to upkeep and repair the property to make it suitable for tenants to live in, but damage caused while a tenant is renting the space isn't necessarily the landlord's responsibility to repair. However, you need to include that in the contract so that tenants cannot dispute responsibility and repairs if damages do occur.
Even if both of you honestly believe you remember the terms you discussed, an oral agreement can become lost if someone is misremembering the facts, since there is no way to prove what was said. A written contract protects you and saves you a lot of stress and trouble when disputes arise.