What Is a Lease Between Landlord and Tenant?
5 Basics of a Real Estate Lease
Landlord and tenants sign lease agreements when renting property. What is included in this lease will vary. However, there are certain basics you should know about lease agreements in general. Here are five basics of a real estate lease.
Examples of Property That Can be Leased in Real Estate:
- Residential: apartment or home
- Commercial: retail or office
- Advertising Space: bulletin board
- Space on a roof or property: for cell phone towers
Examples of Tenants in Real Estate:
- Individual looking to live in residential rental space.
- A retail store looking for space to operate their business.
- An office, doctor or business, looking for a space for their practice.
- Another landlord leasing land to use as parking space for his tenants.
- A company leasing advertising space on a building.
- A company leasing land to put up a cell phone tower.
What Is the Purpose of a Lease?
A lease is meant to protect both the landlord and the tenant by letting each side know their responsibilities and obligations. The lease will include the length of the agreement, the monthly or yearly rental payment, the procedures for collecting rent, as well as the obligations of the tenant while leasing the property.
If the landlord or tenant breaks any term of the lease, the lease is no longer binding. The offending party may be subject to legal action and the financial penalty for breach of contract.
What Is the Difference Between a Lease and a Rental Agreement?
While many people use these words interchangeably, they are not actually the same thing. A lease is an agreement over a set term. A common lease term is for one year. Some may be as short as six months, others as long as five years.
Unless both parties agree to alter the contract, the terms of the lease cannot be changed until the lease expires.
In addition, when a lease expires, the lease does not automatically renew. After expiring, the lease term will either become month to month, or you will have to get the tenant to sign a new lease.
A rental agreement is a much shorter contract. It is typically a 30-day agreement. A rental agreement automatically renews at the end of the term unless either party cancels the contract in writing. The terms of the rental agreement may be altered by either party by providing a written notice of the change. In many states, this notice must be given 30 days before any change will be made.
Who Should Sign the Lease?
The lease should be signed by the landlord or the landlord’s agent, as well as by all tenants over the age of 18. It is very important that all parties living or conducting business in the rental sign the lease. Here is an example of why it is so important.
A husband and wife move into your property. A one-year lease is signed. However, only the husband puts his name on the lease. He is, therefore, the only one responsible for paying the rent.
One month after the couple moves in, the husband leaves. Because the wife never signed the lease, she is not obligated to abide by the terms of it.
Should I Have a Lawyer Create the Lease?
There are many lease forms available online. Many are a good starting point, but you should never rely blindly on them. Each state has specific laws for everything from fair housing to security deposits that need to be followed exactly.
You should have a real estate attorney go over your existing lease or help you to prepare a new one. It is very important that your lease is thorough and legally accurate so you are protected from misunderstandings. You will also want to protect yourself from ‘professional tenants who prey on unsuspecting landlords and try to take advantage of holes in your lease.
How Many Pages Should a Lease Be?
Leases can be anywhere from one page to twenty pages, depending on the amount of information covered. The more in-depth your lease is, the better protected you are; however, do not confuse a long lease with a good lease.
There are certain basics that every lease should include, there will be sections that are only required in some states and then there are clauses which some landlords see as essential while others will omit. You should consult with your real estate attorney and use your own prior experience when constructing your lease. As your landlord career grows and your experience grows, your lease will undoubtedly grow with you so that you are protected from new threats that were previously overlooked.