Essential Terms for a Lease Agreement
Residential and business leases provide renters with a legally enforceable contract regarding the property that they rent. Since homes and businesses are critical parts of people’s lives it is important that the lease include all of the necessary elements to provide security to the renter and the landlord.
Essential Lease Terms
Every landlord and tenant should ensure that the following terms are included in their written lease agreement to protect their interests and prevent future misunderstandings that could potentially lead to litigation. For example:
- Parties to the Lease: the lease should name all landlords and tenants who are bound by the agreement;
- Description of Property: in many cases this may simply be an address and unit number. However, in some cases a more detailed description may be necessary;
- Rent Amount: a dollar amount of rent should be specified;
- Rent Collection Terms: including what day of the month rent is due and where rent is to be sent or collected.
- Term of the Lease: the lease should indicate when the lease begins and ends.
- Termination of the Lease: this should include both the a description of when the landlord can end the lease (for example, for nonpayment of rent or significant damage to the unit) and a description of when and how the renter can terminate the lease (for example, a month to month lease may be terminated with one month’s notice and no penalty but a year’s lease may require a significant financial penalty).
- Security Deposits: the amount of the security deposit and the terms of its future release to the renter should be specified;
- Late Rent Fees: this clause should include the amount of the late fee and the amount past due the rent must be in order for the landlord to impose such fees;
- Utilities: the lease should indicate whether the landlord or renter will pay the utilities;
- Occupants of the unit: most residential leases allow overnight guests and business leases allow customers or clients. However, if a person stays for more than a certain length of time or does business from the property then that person may be considered an occupant rather than a guest and that may not be permitted according to the lease terms;
- Pets: a residential lease should specify whether or not a tenant is allowed to have a pet and if the tenant is allowed a pet, any limitations on species or sizes should be noted in the lease;
- Condition of the Premises: the condition of the premises at the beginning of the lease period as well as the tenant’s responsibility for the condition of the premises during and at the completion of the rental period should be included;
- Repairs by Landlord: the lease should specify what repairs are the responsibility of the landlord;
- Alterations to the Premises: the lease should describe what, if any, alterations the tenant may make to the property;
- Damage to the Premises: the lease should describe whether the landlord or tenant is responsible for damages to the property;
- Right of Entry and Inspection: the lease should include a clause that allows the landlord to enter and inspect the property upon reasonable notice; and
- Resolution of Disputes: the lease should explain how disputes will be resolved.
Optional Lease Terms
The following terms may be included in some leases:
- Right to Renew the Lease: a tenant may have the right to renew a lease at the end of the lease period provided that the tenant was substantially in compliance with all lease terms during the initial lease period;
- Right to Sublet: a lease may allow or prevent a tenant from subleasing or subletting the property;
- Parking: a lease may include parking for an additional fee and/or in a designated spot;
- Rules: a lease may contain certain rules by which a tenant must abide. This if often true if the tenant is living in a condominium complex or house with multiple renters. For example, the renter may agree to avoid making load noises between the hours of 9 p.m. and 8 a.m.
- Possessions: certain possessions, most notably waterbeds, may be prohibited outright or unless the renter pays an additional security deposit or maintains adequate insurance.
Most essential and optional lease terms are included in preprinted, standard lease forms for your state and most leases can be executed without the assistance of an attorney. However, if you have any questions about the lease then you should consult with a real estate attorney in your state for additional information.
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