Important Terms In A Lease Agreement

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A lease or rental agreement sets out the rules Lessor and Lessee agree to follow in their Lease relationship. It is a legal contract, as well as an immensely practical document full of crucial business details, such as how long the tenant can occupy the property and the amount of rent due each month. Lease agreement needs to cover the basic terms of the tenancy irrespective of it being in handwritten or typed form.

  1. Names of all tenants: Every adult who lives in the rental unit, including both members of a married or unmarried couple, should be named as Lessees and sign the Lease Agreement. This makes each Lessee legally responsible for all terms, including the full amount of the Lease and the proper use of the property. This means that the Lessor can legally seek the entire rent from any one of the Lessees if the others skip out or is unable to pay; and if one tenant violates an important term of the tenancy owner can terminate the tenancy for all tenants on that rental agreement.
  2. Limits on occupancy:Agreement should clearly specify that the rental unit can be occupied only the Lessees who have signed the lease and their minor children. This guarantees the right of the lessor to determine the possession of the property. The value of this clause is that it sets out the grounds to evict a tenant who moves in a friend or relative, or sublets the unit, without the permission of the owner of the property.
  3. Term of the tenancy:Every rental document should state whether it is a rental agreement or a fixed-term lease. Rental agreements usually run from month-to-month and self-renew unless terminated by the landlord or tenant. Leases, on the other hand, typically last a year. It is the decision of the owner to make the agreement flexible by not mentioning the specific period.
  4. Rent:Lease Agreement should specify the amount of rent, when it is due (typically, the first of the month), and how it’s to be paid, such as by mail to the office of the owner of the property. To avoid confusions and disputes:
  • acceptable payment methods (such as personal cheque only)
  • whether late fees will be due if rent is not paid on time, the amount of the fee and whether there is any grace period, and
  • Any charges if a rent cheque bounces.
  1. Deposits and fees:The use and return of security deposits is a frequent source of friction between Lessor and Lessee. To avoid confusion and legal difficulties, Lease Agreement should be clear on the limit, use and return of deposits, including:
  • the dollar amount of the security deposit (must comply with the respective state laws for setting up maximum amounts)
  • how the Lessor utilise the deposit (Eg:  for damage repair) and the activities prohibited for tenant (such as applying it to last month’s rent)
  • the time and mode of return of the deposit and account for deductions after the tenant moves out, and
  • Any legal non-returnable fees, such as for cleaning or pets.

It’s also a good idea (and legally required in a few states and cities) to include details on where the security deposit is being held and whether interest on the security deposit will be paid to the tenant.

  1. Repairs and maintenance:Set out the responsibilities of both the Lessee and the Lessor for repair and maintenance in the Lease agreement, including:
  • the lessee’s responsibility to keep the  premises of the leased property, clean and sanitary and to pay for any damage caused by his or her abuse or neglect
  • Specific details on the procedures to handle the complaint and repair requests, and
  • Restrictions on lessee repairs and alterations, such as adding a built-in dishwasher, installing a burglar alarm system, or painting walls without the permission of the owner of the property.
  1. Entry to the Lease property:To avoid Lessee’s claims of illegal entry or violation of privacy rights the Lease Agreement should clarify the legal rights of the Lessor to access the property.
  2. Restrictions on tenant’s illegal activity:To avoid the trouble of the Lessee, to prevent the damage of the property and to limit the exposure to lawsuits from residents and neighbours, Lease Agreement should contain the clause prohibiting disruptive behaviour, such as excessive noise, and illegal activities like drug dealing.
  3. Pets:Lease Agreement should be clear on this subject. If the Lessor allows pets, agreement should identify any special restrictions such as a limit on the size or number of pets or a requirement that the Lessee will keep the yard free of all animal waste.
  4. Other Restrictions:

Depending on your property, the following lease agreement terms may be useful to include in your lease agreement:

  • Right to renew the lease – if the tenant has the right to renew the lease at the end of the lease agreement, those terms should be listed in the lease agreement. Ideally, a new lease agreement will be signed each time the tenant renews.
  • Right to sublet the space – if the tenant has the right to sublet the property to another person, the lease agreement should spell out those terms.
  • Parking restrictions/rules – if the property has parking or offers parking in a designated spot, those terms should be listed in the lease agreement.
  • Possessions – if certain possessions, like water beds or grills are not allowed on the property, those terms should be listed – along with the consequences if those items cause damage to the property.
  • Property rules – if the property is a multi-unit, the landlord may specify rules that govern behaviour on the property such as avoiding loud noises after 10 p.m. or not doing vehicle repairs in the parking lot, for example.

 

While many essential and optional lease terms are included in pre-printed, standardized lease forms, those terms may or may not fit your needs as a property owner. It’s important to note, however, that standardized agreements don’t always fit the situation and they may or may not be customized to meet your state and local requirements. 

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.

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