Q&A for How to Account for Rent Free Periods

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How should I write the lease addendum?

Nathan Miller
Property Management Specialist
Nathan Miller is an entrepreneur, landlord, and real estate investor. In 2009, he founded Rentec Direct, a cloud-based property management company. Today, Rentec Direct works with over 16,000 landlords and property managers across the United States, helping them manage their rentals efficiently.

Nathan Miller

Property Management Specialist

Expert Answer

The content and length of an addendum to a lease will depend on the specific subject it addresses. However, maintaining brevity and clarity is crucial to ensuring all involved parties can comprehend its terms. It is essential to craft the addendum in compliance with the legal standards of the respective jurisdiction since neither the addendum nor the lease can supersede state laws. For instance, if state law mandates the acceptance of Section 8, an addendum cannot be drafted to prohibit such acceptance. Adhering to legal requirements while making the document concise and accessible is key to an effective lease addendum.

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What accounting concepts do I need to know to account for rent-free periods?

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Anyone accounting for rent-free periods will need a working knowledge of dual-entry accounting and amortization procedures.

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If a tenant takes occupation of a property before the lease commencement date from which date should rental payments be reflected in the profit and loss account?

Community Answer

Regardless of when the tenant actually moves in, the rent-free expense is still amortized over the lease period. The same goes for rental payments, which should be recorded for the months that they correspond to.

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What if lessor is paying cash incentive 1 year prior to the inception of lease extension, does deferred credit not begin until lease renewal or at time of cash transfer?

Community Answer

The deferred credit would begin at the start of the lease renewal.

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