A lease agreement is a legal document—a contract between a landlord, who rents out the property, and a tenant, who pays rent. This agreement specifies all rights and responsibilities regarding the leased property, which is why the parties should have one.
With a written lease agreement, the parties establish clear terms under which a certain property is leased, can be used, and how it will be paid for. This way, the parties ensure clarity on terms and conditions and prevent potential disputes in the future.
In this article, we will explore questions such as:
What is a lease agreement for a house/car/apartment/land?
What is a lease agreement fee?
So, continue reading to discover answers to these and much more.
What is a Lease Agreement?
A lease agreement is a legally binding contract both parties sign to regulate their relationship regarding the leased property. Once the parties agree on all terms, they should sign the contract to confirm their consent.
If either party believes there's a breach of the lease agreement, they can initiate legal proceedings to defend their rights based on the terms of the agreement. It's important to note that lease agreements often include provisions for penalties, such as a lease agreement fee, in the event that rent is not paid on time, outlining the consequences of violating the contract.
Therefore, it's crucial for both parties to include all relevant details in the lease agreement to protect themselves in such situations.
Additionally, depending on the type of lease, some states allow leases, like residential lease agreements, to be in oral form. In such cases, tenants' rights laws in each state determine how landlord and tenant disputes over verbal contracts are handled.
Lease Agreement vs. Rental Agreement
While lease and rental agreements are often used synonymously to refer to renting property, they differ in the duration of the rental period. A rental agreement usually covers shorter periods, often month-to-month leases, whereas a lease agreement typically spans a minimum of six months or more.
When deciding whether to lease or rent a house, apartment, land, or any other property, carefully considering these differences is essential.
Types of Lease Agreements
The most common types of lease agreements are the following:
Temporal Types
Month-to-month lease agreement. This agreement allows renting a property for less than a year, with the option to renew or terminate the lease every month.
Week-to-week lease agreement. Similar to a month-to-month but with a shorter period, typically renewed or terminated weekly.
Vacation lease agreement. Designed for short-term rental used for vacation, often lasting only a few days.
Property Types
Residential lease agreement. Used for renting apartments, houses, or condominiums so the tenant and their families can live there.
Land lease agreement. Suitable for leasing agricultural land or other types of land for a more extended period, usually up to 99 years.
Commercial lease agreement. This type is used for renting business premises, often with a legal entity as a tenant.
Subleasing Types
Sublease agreement. This agreement allows a tenant to rent out part or all of the leased property to a third party, making the new tenant responsible to the landlord.
Sublet agreement. This one is similar to a sublease agreement, but the original tenant remains responsible to the landlord for the leased property.
What Information Goes on a Lease Agreement
A lease agreement should be comprehensive and include the following information:
Basic Information
A lease agreement should start with basic information about the parties, such as their names, addresses, and contact information. If one of them is a legal entity, then the agreement should outline the registration number, tax number, and name of the legal representative.
Next, the agreement must clearly describe the leased premises, whether it's an apartment, house, land, or any other type of property. The description should be specific enough to individualize the property, and the landlord should disclose any existing defects or flaws.
Financial Terms and Lease Conditions
The financial terms include the rent, which is the price the tenant pays to use the premises, and the security deposit, a refundable sum paid by the tenant as a guarantee for covering eventual damages. Additionally, the agreement should mention any late fees, specifying the fee amount if the rent is not paid within the grace period.
The lease duration must also be defined, indicating how long the lease will last. Depending on the property's type and purpose, this can vary from weeks to decades. In the end, parties should clearly state the reasons for lease agreement termination.
Rights, Obligations, and Additional Provisions
The lease agreement should outline each party's rights and obligations toward each other and the premises. It should also allow for additional provisions, such as jurisdiction clauses and dispute resolution mechanisms, providing a framework for handling potential conflicts.
Finally, both the landlord and the tenant must sign the lease agreement to make it legally binding. For those who seek additional validation, the lease agreement can be notarized in front of a notary public.
How to Create a Lease Agreement
To create a valid and comprehensive lease agreement, follow these seven steps:
#1. Access Our Website and Choose a Template
First, go to the Contracts.net lease agreement builder and choose the appropriate type of lease agreement for your apartment, house, condominium, land, or commercial space.
#2. Enter Details About Parties and Premises
Every lease agreement must include information about the landlord and tenant, such as:
Names
Addresses
Contact information (phone numbers, email, mailbox numbers)
Social security number
Tax identification number and the name of the legal representative if one of the parties is a legal entity
Next, enter precise details about the premises, including:
City, municipality, and street where the property is located
Property measurement
Number of rooms
Description of additional buildings that serve the main property
#3. Specify Lease Terms
This section should include all agreed-upon rental conditions, primarily:
Lease start date
Lease duration
Renewal options
Termination conditions
Subleasing allowance
Additionally, each state law generally prescribes certain disclosures and addenda, such as asbestos disclosure or bed bug addendum, that the lease agreement must contain, which provide information about the property-specific condition and how it can be used.
Therefore, make sure you know which of these are mandatory and which are options, and include them in the lease agreement.
#4. Enter Financial Details
The parties should outline the financial details, such as:
Rent amount
Payment schedule
Security deposit
Additional fees (e.g., late fees)
Here, the landlord and tenant are free to agree on the rent amount and payment method as they wish. But, when it comes to the security deposit and additional fees, they must ensure their agreement complies with state law, as their rules are strictly regulated.
#5. Outline the Rights and Obligations of the Landlord and Tenant
The lease agreement contract should detail the parties’ rights and obligations, such as regular and special maintenance of the premises, utility, taxes, and other fees, property access, and more.
Regulating the landlord's and tenant’s rights and obligations can help avoid confusion and potential disputes down the line.
#6. Include Legal Provision
The landlord and tenant can add clauses, such as:
Dispute settlement clause. Describing how potential disputes will be resolved.
Jurisdiction clause. Stating which state’s law will apply to the lease in case of court disputes.
Additional legal provisions make lease agreements more comprehensive, helping the parties to handle any situations effectively if they occur.
#7. Review and Sign the Lease Agreement
The final step is to review the contract and check that all information is correctly documented. If so, the landlord and tenant sign the document to make it valid and legally binding. The parties may also notarize the lease agreement to further validate it.
Rental Lease Agreement Benefits
The rental lease agreement represents a distinct type of lease due to its specified duration.
It provides the following benefits for landlords:
Security. Like all lease agreements, a rental lease, despite its typically shorter duration, provides landlords with security by allowing them to require security deposit from tenants and agree to other specified contract terms.
Control. This type of lease agreement gives landlords the option to not renew the agreement or to adjust its terms, such as increasing the rent.
Predictability. Landlords can be assured of a consistent rent payment on agreed-upon dates, ensuring they can rely on timely income and the fulfillment of all agreed-upon terms.
On the other hand, this lease agreement type offers benefits for a tenant, too, such as:
Flexibility. Rental lease agreements offer tenants greater flexibility due to their shorter duration. After its expiration, tenants can choose to renew the agreement or decide to move out, giving them the power to make decisions about their living situation.
Privacy. During the lease term, tenants have the right to privacy in the rented property, as landlords cannot enter without notice or a valid reason, respecting tenants` privacy and ensuring they feel secure in their rented property.
Security. Tenants are assured a stable place to live for the agreed-upon period. This security means they can settle in without worrying about having to move unexpectedly.
What Happens if a Lease Agreement is Broken?
If a lease agreement is broken, both land landlords and tenants may face legal consequences and financial implications, namely:
Security Deposit. In the case of a lease agreement breach by tenants, such as unpaid rent, bills, or damages, the landlord has the right to withhold part or all of the security deposit to cover incurred costs.
Compensation. If the landlord breaches the lease agreement, such as by prematurely terminating the lease or other violations, they may be required to compensate the tenant for reasonable relocation expenses or financial losses, like increased rent at a new property.
Legal Action. Breaching the lease agreement can lead to legal action, in which either party can file a lawsuit. Filing a lawsuit can result in a legal dispute to prove the terms of the lease agreement and which contractual obligations were not fulfilled, potentially prolonging the process and increasing costs.
Negative Rental History. Violating a lease agreement, whether by the tenant or the landlord, can impact their reputation and make it harder to secure future rentals or leases for the rented property.
3 Mistakes To Avoid When Making a Lease Agreement
The lease must be thoroughly regulated by the agreement, and here are three mistakes to avoid when making a lease agreement to ensure parties have a valid document.
Lease Agreement Mistakes
Failure to Provide Complete Information and Disclosures. As explained in previous sections, there are the most critical elements every lease agreement must include. Any omission or lack of precise definition can lead to misunderstandings, disputes, and relationship breakdowns. In such cases, the lease fails to serve its purpose and cannot represent a valid agreement.
Neglecting Property Inspection. Before finalizing the lease agreement, both the tenant and landlord must inspect the property to ensure there are no hidden defects or flaws. Otherwise, the future of their leasing relationships becomes uncertain, which most likely leads to disputes.
Not Addressing Maintenance and Repairs. Both the landlord and the tenant need to maintain the leased property in a usable condition. Landlords are responsible for major repairs, renovations, and fixes, while tenants are responsible for regular and everyday maintenance costs. Failure by either party to adhere to this can risk property damage, leading to potential liability and the need for compensation.
Final Thoughts
Understanding the importance of having a lease agreement that regulates the landlord-tenant relationship regarding the rented property is vital to protecting the rights and interests of both parties.
As a result, entering into a lease agreement ensures mutual understanding and compliance with rights and responsibilities for both parties: the landlords, who seek assurance of property maintenance and timely rent payment, and the tenants, who seek favorable conditions for the leased property and want to ensure it is well-maintained and secure during their occupancy.
The clarity and protection the lease agreements offer prevent misunderstandings and potential conflicts, allowing both parties peace of mind, even if unexpected circumstances arise.
