Lease Agreement Vs Rent Agreement- Everything You Need to Know!

At the onset, though a lease agreement may seem the same as a rent agreement, that’s not the case. There are stark differences between the two. One of the most significant differences is the duration of the tenancy period.

A rent agreement is a document wherein the property owner gives possession to the tenant for a defined, stipulated time. In contrast to a lease agreement, the duration in this case is usually shorter. While a lease agreement can last from 6 to 12 months, a rental agreement usually lasts only a month or so.

Let’s find our what else sets lease agreement apart from a rent agreement.

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When formalizing the renting process, the document signed between a tenant and a landlord can either be a rental agreement or a lease. Different laws apply to these distinctly different agreements in the U.S.

According to U.S. rental laws, a lease is a legal document that ‘transfers a right to enjoy a property for a predetermined period, often 12 months or more, in consideration of a price paid or promised. The lessee (tenant) promises to adhere to the terms, such as making monthly payments and not damaging the property, while the lessor (landlord) promises to provide the property in a livable condition for the agreed duration.’

Basis for Differences	Lease	Rent
1. Meaning	This is a lease agreement between two parties.	This is a leave and license agreement.
2. Term	A leasing contract is usually a long-term agreement.	The rental agreement is a short-time agreement.
3. Accounting Standards	Leasing contracts follow accounting standard 19 (AS-19).	There is no such accounting standard for a renting agreement.
4. Parties	Lessor and lessee.	Landlord and tenant.
5. Consideration	The payment for the lease is made monthly.	Rent is paid on a monthly or quarterly basis.
6. Maintenance	In leasing, the lessee has to maintain the property.	In renting, the landlord has to maintain the property.
7. Change in contract/ agreement	There can be no change after a contract is signed.	The landlord can change the agreement anytime.
8. Offer at expiry	The lessee must purchase the asset/property once the term is over.	There is no such offer given to the tenant by the landlord.

Definitions

In a lease agreement, the terms used are “lessor” and “lessee”, while in a rent agreement, they are “landlord” and “tenant.”

Type of Property

Another critical difference between these two agreements is that renting is typically for residential properties, while leasing is often associated with commercial properties or business operations. So, for instance, a business could take a location on lease to store equipment.

Terms of agreement

Once the lessor and the lessee discuss and finalize a leasing agreement, it becomes fixed. The lessor cannot raise the rent or alter any clause until the end of the tenure unless the lessee mutually agrees to the change. In a rent agreement, there’s flexibility to modify the document when either the landlord or the tenant decides.

Another important distinction is that, in a lease agreement, the lessee often pays for certain maintenance or repairs, depending on the lease terms. However, this is not always the case with a rent agreement, where terms can be more flexible.

Renewals

When a lease agreement expires, a new contract often needs to be drawn up, as it doesn’t renew automatically. In contrast, in a rental agreement, if the tenure ends, the tenant can sometimes continue to stay on a month-to-month basis with the landlord’s consent, under terms and conditions agreed upon by both parties.

Maintenance

Generally, when a business doesn’t have substantial funds for extended periods or prefers not to commit to a long-term location, they might opt for a lease agreement. In such agreements, it’s often outlined whose responsibility it is to maintain and service any leased equipment or the premises itself. However, in a rent agreement for residential properties, the landlord typically has broader responsibilities to maintain the property’s livable condition.

📖 Also Read: Can a Realtor be a Property manager?

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A lease agreement is a legal contract between a lessor and a lessee, laying out the terms and conditions of their understanding. It’s crucial for both parties to have clarity about their responsibilities and expectations throughout the tenancy period.

Understanding the Duration

Typically, a lease agreement spans between six to 18 months. Once both parties sign the agreement, it becomes binding, ensuring that the terms and conditions are followed. For those uncertain about the length of their stay, there’s an option of a month-to-month rental agreement, offering greater flexibility.

Key Features of the Agreement

The lease agreement should be as clear as possible, detailing the dos and don’ts for both the lessor and lessee. Given its binding nature, neither party can change any clause without the other’s written consent. Whether it’s a house, vehicle, or equipment, the agreement’s clarity ensures protection for both parties.

Leasing Versus Buying

One significant advantage of leasing is avoiding the commitment of purchasing. Some lease agreements even have an option to purchase or “rent-to-own.” In such cases, rents paid can sometimes be credited towards the property’s down payment.

The Concept of Subleasing

For those who might not be using the property for the entire lease term, subleasing is an option. It allows the lessee to legally permit someone else to use the property under specific terms. However, subleasing comes with its set of challenges, making it vital to have all clauses clearly defined.

	Pros	Cons
Stability	Steady monthly passive income for a long time.	Once committed, the rent cannot be changed even in the face of financial difficulties.
Agreement Strength	Lessee is bound by the law of the land in case of an altercation.	Breaking a lease is costly, and not all states allow it.
Certainty	Both parties are protected from sudden changes or surprises.	If either party wishes to end the lease early, it’s generally not possible without penalties.
Protection for Lessee	The lessor cannot evict the lessee on a whim.	–
Rent Control & Renewal	In some places, rent-renewal laws protect the lessee from drastic rent hikes.	In rent-controlled areas, the lessor may miss out on the appreciating value of the property due to nominal increases or no hikes.
Flexibility	–	The lessor and lessee are both bound by the terms, limiting flexibility.

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2.1 Is the Lease Legally Binding?

A lease agreement is enforceable in a court of law, making it legally binding. Both the lessor and the lessee are obligated to adhere to its terms.

If there is ever a dispute, either party can reference this document in court. Consequently, thoroughness in documenting all lease aspects is paramount. Therefore, it is essential to cover all aspects of leasing when creating this master document. 

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2.2 Understanding Verbal Lease Agreements

While verbal lease agreements might seem convenient, they are unstable and challenging to validate. Not all states recognize oral contracts as legally binding.

However, tenant-rights laws in every state protect those with a verbal residential lease in disputes. On the flip side, verbal commercial lease agreements, given their complexity, are typically not permissible.

Source

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2.3 Written Lease vs. Verbal Lease

The enforceability of verbal agreements hinges on any written evidence, such as rent payment receipts. Lacking such proof, courts usually don’t recognize these agreements. Without a written lease, landlords could face challenges evicting tenants for perceived legal violations.

Source

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2.4 Key Insights into Rent Agreements

Lease and rent agreements share similarities, with tenure being a primary differentiator. Rent agreements typically last up to 30 days and undergo monthly renewals. Their inherent advantage is automatic renewal, a feature not present in lease agreements.

Moreover, rent agreements offer more flexibility. Changes to the contract, with mutual consent, are more straightforward, and adjustments can be made with prior notice from either party.

📖 Also Read: Is it better to buy from an Owner or a Realtor?

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Lease and rent agreements are often similar in many respects. The primary distinguishing factor between the two is the contract’s tenure. Typically, a rent agreement is designed to last 30 days or less and is subject to monthly renewal. One of the standout benefits of a rent agreement is its automatic renewal at the start of a new month, a feature not commonly found in lease agreements.

Moreover, rent agreements tend to offer more flexibility compared to lease agreements. This adaptability means that with mutual consent, both parties can modify the contract. All that’s required is advance notice regarding any changes to the terms and conditions.

3.1 Characteristics of a Rent Agreement

A rent agreement serves as a binding legal contract between a tenant and a landlord. Essentially, it is designed for renters who wish to utilize the landlord’s property for a specified period as a temporary measure.

Upon the expiration of this pre-decided duration, the tenant is expected to vacate the premises, unless there’s an agreement for renewal between both parties. Generally, rent agreements cover a shorter duration, often less than six months, and feature an automatic renewal clause at the end of each term.

Should both parties wish to make alterations to the established terms of the document, the inherent flexibility of a rent agreement allows for such changes. However, when these adjustments occur on a monthly basis, it’s crucial for both parties to assess the viability and carefully consider the advantages and disadvantages of each clause before finalizing any changes.

	Pros	Cons
Flexibility	Ideal for jobs that require extensive travel. Suitable for project-based or transferable jobs. Allows children to attend different schools. Great for short-term stays.	Unstable as they can be terminated on short notice. While a 30-day notice is common, some locations may have shorter notice periods.
Short-term	Less commitment than a lease.	Less security than a lease.
Cost	Typically less expensive than buying a home, especially in the short term.	Rent can increase at any time, which can be a financial burden.
Control	You have less control over the property than you would if you owned it.
Responsibilities	You are responsible for repairs and maintenance, unless otherwise specified in the rental agreement.
Tenant rights	You have certain rights as a tenant, such as the right to a habitable living space and the right to privacy.	The landlord also has certain rights, such as the right to enter the property for repairs or inspections.

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Lease agreements cater to both parties’ interests. Here are some key elements that are often included:

4.1 ESSENTIAL SPECIFICATIONS

Contact Information: Details of both the lessor and lessee, including names, phone numbers, and email addresses. Every adult residing in the rental property should be mentioned, regardless of their marital status, as all are legally accountable for the rent. All tenants must adhere to the agreement’s rules and regulations, understanding the risk of contract termination should any one of them violate its terms.

• Property Details: This section outlines the property’s specifics, such as square footage, address, amenities, and landmarks. It also highlights areas with restricted access for tenants. The more detailed and transparent these clauses are, the better it is for all involved.

• Lease Specifics: It’s essential to define the lease type (commercial, residential, etc.), along with the commencement date, duration, and end date.

• Deposit and Fees: This section details the security deposit amount and conditions. It should adhere to state security deposit limits and specify any non-refundable portions. Situations under which the deposit can be used, such as unpaid rent or accidental damages, should also be highlighted.

• Rent Details: Information on the rent amount, payment dates, potential late fees, consequences of bounced checks, and other related specifics are included here.

3.2 RULES & REGULATIONS

• General Rules: This segment includes guidelines regarding additional installations, alterations to the property, and restrictions on subletting or hosting long-term guests.

• Pets: The agreement should clarify whether pets are allowed, specify allowed breeds or sizes, and detail the responsibilities of the pet owner, like cleaning duties or leash requirements.

3.3 ADDITIONAL ASPECTS

• Rights: This section defines the legal rights and obligations of both parties.

• Maintenance and Repairs: The responsibilities of the lessor and the tenant concerning repairs and maintenance are outlined here. Clauses related to damages due to negligence, regular wear and tear, and appliance usage should be clearly stated.

• Occupancy Limits: The maximum number of occupants allowed on the property is specified here, including guidelines on guest stays.

• Utilities: Clarification on which utilities are provided by whom.

• Dispute Resolution: Procedures and steps for resolving any disagreements.

3.4 STANDARD ADDITIONS

• Lease Clauses: These can range from buy-out provisions to disturbance clauses. They’re added to ensure compliance with local landlord-tenant laws.

• Lease Notices: Mandatory notices like the “Notice of Habitability” and “Notice of Foreclosure” are incorporated.

• Rent Lease Addendums: These are additional clauses or details that can be added to the base agreement, such as rules about pets, smoking, or inspections.

• Rental Lease Disclosures: This covers essential property details, like mold presence or use of lead-based paint, as mandated by local laws.

• Tenant Rights and Discrimination: This crucial section underscores a tenant’s rights and the importance of adhering to federal Fair Housing Laws. It also emphasizes landlord conduct to ensure tenants’ privacy and safety.

Read More: Can a Real Estate Agent Represent Themselves as a Buyer

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This part of the agreement includes all the essential details of the lessor and the lessee. To begin with, it has to have all their basic information – their names, phone numbers, email addresses, and addresses.

If there are any co-owners of the property, their names and details too must be included in the documentation. It’ll help to include the details of any property managers if anyone is involved in executing the deal. Along with these details, one should have the details of children or other people living on the property.

It is essential to know that certain states limit the maximum number of occupants on a property. In such cases, following complete occupancy standards is imperative.

5.1 All about the property

It is imperative to include all the details of the property. Usually, there are two main types of rental properties. There are single-family homes and multifamily homes. Single-family homes are the usual standard houses or townhomes, while multifamily homes are duplexes, multiplexes, condos, basement apartments, mother-in-law suites, and apartments. When mentioning the type of property, it is essential to include information about who the property belongs to. For example, is it part of a homeowner’s, or does it belong to a condo association?

5.2 Utilities & services

This part of the agreement must detail every aspect of the services and utilities available to the tenant. To state a few examples, it must include the availability of natural gas and electricity, phone, internet, and cable services, trash and snow removal, water and sewer services, landscaping, furniture and fixtures, and other specifics unique to that property. It needs to mention how tenants can utilize these things and how they will pay for them.

5.3 Exit, eviction and renewal

This section of the lease agreement includes details of different scenarios in case the tenant has to exit before the stated agreement’s expiration date.

The terms of the lease consist of two aspects – termination and eviction. You need to check whether the termination clause has the end date details, the conditions, and the other provisions. Like – what if the tenant wants to renew the lease? From the usage of drugs to subletting without the landlord’s knowledge to violating rules mentioned in the agreement, it is imperative to include as many scenarios as possible.

5.4 Date and Amount

This agreement section mentions the date of paying the rent and the amount. One can break it down into three aspects – the first due date, the monthly due date, and the monthly amount to be paid.

5.5 Additional fees

When the two parties decide on the other aspects of usage – like electricity or gas, or any other service being provided to the tenant, it must mention how the tenant will pay these additional charges and by what date.
This section also must include late fees in case of check bounce for insufficient funds or any added fees levied on the tenant.

5.6 Payment method

Both parties need to decide beforehand the payment method that both are comfortable following. One needs to state this in the agreement clearly. Usually, online payments, check payments, and money orders are the methods followed by most people.

5.7 Obligation

Some of the tenant obligations include:

• Only legally allowed residents will stay on the property.
• There should be no commercial activities on a residential property.
• Following the rules and regulations mentioned in the lease agreement.
• Not disturbing other people who are residing on the premises.
• In case repairs are needed, inform the landlord accordingly and cooperate with the landlord to get the needful done.
• Use and maintain the property properly. Keep it clean and sanitary.

A few of the landlord’s obligations include:

• Ensuring all the clauses mentioned in the agreement are followed, like maintaining the property well and keeping it liveable for the tenant.
• Maintaining the tenant’s privacy and not interfering with their lifestyle.
• Completing the necessary repairs in time.
• Providing the required utilities that are promised and mentioned in the agreement.

5.8 Insurance of tenants

If the tenant needs to buy a renter’s insurance, one must mention this at the onset, and the agreement should carry that clause. Certain states precisely follow this rule. If that’s the case, maintaining comparable liability insurance is a wise thing to do. Including a minimum coverage amount in the lease agreement keeps everything clear on paper.
There are insurance brokers who are experts in this aspect. Approaching them is a good move.

5.9 Customized rules

These are specific rules to eradicate all ambiguity. Some of them include:

• Written consent rules: These are related to things like painting, changing locks, any modifications made on the property, and other specific aspects. The documentation of these aspects abolishes ambiguity.
• Association rules: Homeowners or condo association rules mainly apply to the neighborhood or association. These need to be mentioned and followed diligently.
• Rules of Safety: Everything about the safety of the property and premises is part of this section of the agreement. Aspects like the maximum weight allowed to keep on balconies or porches, prohibition of explosive stuff in unsafe places on the property, and other such things.
• Fundamental rules: Some landlords include essential rules too in the agreement. What happens if a key is lost? What are the actions to be taken to get a new key? Who pays for it, and how does one get that made?
• Maintenance rules: These rules are various aspects of the agreement, which include things like trash removal, mowing the lawn rules, shoveling sideways, and many such.

5.9 Policies

In this agreement section, clear policies about different aspects get included. For instance, what are the pet policies, smoking, and parking dos and don’ts? In some cases, pets need additional insurance and rent. However, assistance animals do not get included in this clause.

This policy must mention parking policies, areas, and anything specific to the property. There are instances where landlords offer additional storage space. If that’s the case, one needs to add that particular clause along with the extra rent charged.

5.10 Review and sign to seal

When everything is in writing, it is most important to go through every aspect of the agreement in detail and check for errors and omissions.

Once the document is ready, it can be sent to the tenant electronically for them to go through this master document. After the two parties agree on all the terms and conditions mentioned in the agreement, the parties can seal the deal.

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6.1 Inform and share your rental unit with tenants

First things first – the tenants need to be shown the property. Visiting the place and seeing it firsthand helps them make their decision. Most times, it is love at first sight. If the tenants like what they see the moment they step onto the property, they’re more likely to enquire about it. There are two ways of conducting these visits. One way of doing it is going to the property directly and showing the could-be tenants the house. The other way is hiring a property manager (some companies do this regularly) and letting them show the property to the tentative tenants.

6.2 Filling out a rental application form

If the tenant likes the property and is okay with the rent charged, the second step is asking the potential tenant to fill out a rental application. The form comprises basic details of the tenant, such as name, current address, level of income, rental preferences, and place of employment (a verification letter from the employer should suffice).

6.3 Background checks

Running a background check on the to-be tenant is important. In addition, it’s essential to check for any criminal history or a history of bad credit to avoid bad tenants. Criminal history is self-explanatory. No one wants to have a tenant with such a past. However, if they were only involved in something petty for which there is a criminal history, it can be considered an exception to the rule. In such cases, anti-discriminatory laws protect such tenants.

A bad credit history clearly shows lousy money management. It could lead to rent not being paid on time or skipping rent sometimes. But, of course, no one wants to get into such tricky matters, given there is history. So be doubly sure to correctly do the background checks.

6.4 Tenant references

While doing the background check, it is essential to get in touch with the references that the tenant has mentioned in the application form. Calling them and checking their authenticity is imperative. In addition, it is most important to figure out their genuineness, their capacity to pay. The questions for such reference checks can include if there’s any criminal history or if there has been any bad credit history of which these references are aware.

6.5 Preparing a lease agreement

Now that the landlord and tenant are happy about the property, it’s essential to use a lease agreement builder and customize the lease agreement as per the wants and requirements of both the landlord and the tenant. This document needs to include the date when the tenant can start to use the property, the end date, the tenure, the monthly rent amount, and the date on which the tenant will pay it. Both parties need to agree to these terms and amounts. It should also include late rent fees, who will bear the utilities’ expense, and penalties incurred if the lease is terminated abruptly for any reason. Finally, if the tenant is not moving in immediately, one must add a prorated rent. It is the rent for the period from the date of the agreement until the tenant moves in.

6.6 The final handover

Once every bit of the agreement is finalized and listed, and both parties agree upon the terms, it’s time to go through the rental inspection checklist and take note of the property before the tenant moves in. Once this process is done and finished, it’s time to hand over the keys to the property to the tenant.

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There are two ways to create a residential lease agreement:

• Standard lease agreement
• Comprehensive lease agreement

Standard lease agreement

It is a master document where one needs to mention the essential details about the tenant and the landlord. It includes:

• Contact details of the landlord and the tenant
• Every property detail including address, area, amenities, unique selling proposition, and other vital information.
• This agreement also should include lease specifics – term and type of lease.
• Rent details can consist of the amount, date, and late fees in case of failure of payment of rent.
• Security deposit details such as the amount, when to use it for other purposes, and when to return it.
• Dispute resolution methods – in case of any discrepancy, the plans and actions are to be taken to resolve the issue.
• The landlord’s and the tenant’s rights and obligations.

Comprehensive lease agreement

• This type of lease agreement includes the finer details of the deal.
• You need to mention if it is an empty or furnished property.
• Describe the inclusions in a furnished house before handing it over to the tenant.
• Zero in on a property manager who will monitor the property at regular intervals on behalf of the landlord. Ensure the tenant is also okay with this appointment, and the manager will inspect the property from time to time.
• Rules and conditions specify if one can run a business from home (this property).
• Pet and other additional fees, if any, are levied to maintain the property well.
• Though every adult residing on the premises is liable to pay rent (by law), it is advisable to appoint a guarantor who will be held responsible and liable if the tenant defaults on rent.

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Rental application

This document includes all relevant details of the tenant. From basic contact details to whether or not the tenant has a criminal history, this document will be the deciding ground for acceptance or failure of the selection of the tenant. It is always wise to run the document by legally educated people with specialized knowledge about rental law.

Tenant screening

Tenant screening follows particular rental specifics, such as the potential client’s income. Then the applicants who earn enough to be able to pay the rent on time should be shortlisted.

A detailed list of questions for this screening process will expedite the procedure correctly. Similarly, creating a set of questions to ask the employer and references given by the to-be tenant is always a good idea. Also, doing a thorough background check of the tenant will save agony that may follow later, in case the tenant and the landlord get at loggerheads. Instead of cutting corners, it is better to give this task to a known firm specializing in this field. Again, it saves the landlord the pain and agony in case something goes wrong with the deal.

Rental Agreement documents

This agreement includes the descriptions of the roles, responsibilities, rights, and obligations of both the tenant and the landlord.

Dates, amount, lease terms, protection policy, and tenant accountability.
A brief about when and how to execute the eviction process if necessary.

Welcome letter and a move-in checklist

The how-to document includes all the ways to explain to the tenant how to move in. Ranging from how to pick up the keys to get renter’s insurance to set up utilities – this document will help the tenant to have a smooth move-in.
The move-in checklist includes all the existing things on the property. It details the property’s condition before the tenant comes to live on the property. Once the contract expires, this document comes in handy. The landlord can check if the tenant is responsible for any damage to the property other than the usual wear and tear.

Lease renewal paperwork

With about 90 days left for the expiry of the existing agreement, the landlord can ask the tenant if he wants to extend his stay. If the two share a great rapport, letting the current tenant extend the stay is a good thing, as this can save the landlord time, money, and effort in searching for a new tenant.

Move-out documents

Move-out documents include a move-out letter and a move-out checklist. The letter states how the tenant plans to move out while explaining how the landlord intends to return the deposit.
It also includes cleaning expectations, the date when the landlord can come over to check out the property, deductions in the security deposit, if any, and requesting a forwarding address.
The move-out checklist includes all that the tenant expects when vacating the flat. This document is essential as it helps in determining whether or not all the stated conditions have been followed or not during the stay. The deposit is to be returned based on this.

Keeping in touch with tenants

It is a file maintained from the start of the renting process until the tenant leaves the property a few months later. From the time the tenant filled out the application form showing interest in the property till the return of the deposit, every bit of communication should be documented, especially in the digital format. Scanning them all and storing them in the cloud is the best way to keep these bits and pieces of communication.

📖 Also Read: What to ask a realtor when selling?

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Ideally, a rent agreement must include:

• Contact details of both landlord and tenant
• All the details of the property – from its area to amenities
• Length and type of lease, including the rental information, which has the number of late fees and payment schedule
• Details of security deposit
• The landlord’s and tenant’s rights and obligations

9.1 Documents required to Rent

Move-in and move-out letters

These letters state the property’s condition when the tenant is moving in and state the state of the property when the tenure expires. This part of the documentation must include how the tenant must hand over the property and how the landlord should accept it when the tenant leaves. It is a valuable document when it comes to returning the security deposit. In case of damage, one can deduct the correct amount from the deposit.

Rental application

When the tenant approaches the landlord, they must fill out an application form detailing all their requirements and expectations from the property. It also includes the tenant’s credit history, income generation details, and current address. Where there are many tenants, this form gives the landlord a way to shortlist the potential tenants.

Emergency contacts of the tenant

In case of any emergency, this is the go-to contact for the landlord. Whether it’s an accident or non-payment of dues, if the tenant leaves the premises abruptly, this is the person the landlord can contact and ask about the tenant’s whereabouts.

Lease agreement

This drafted agreement includes every minute detail of what is expected from the tenant and the landlord when the two parties sign the deal.

Addendum

There are times when even after drafting the agreement, finalized, and signed, there is something that gets left out. In such cases, an additional supplement can be made and added to the existing agreement. This legal document includes all the newly added terms and conditions.

Mortgage and improvements

This is the file that contains everything to do with the agreement details, bills, receipts, and other details about the progress of the property. It also includes details of any loan taken to refinancing documents.

Utility providers

It include all the utility providers the landlord can contact to set up the needed and promised utilities. It is the go-to list in case one needs to fix anything. The contact details of each utility provider come in handy.

Lease renewal letter

This template details the terms and conditions in case of a renewal. Sent usually 60 days before the agreement ends, this document includes details such as lease expiry date, new lease terms, and conditions. In addition, it also consists of an increase (or decrease, if any) in the rent rate, new rent amount, and a date by which the existing tenant can reply to his views on renewal.

Move-out letter

This letter includes all the tenant needs to be aware of when leaving the property. This document must also include details about what is expected from the tenant if they decide to vacate the property before the scheduled date.

9.2 Documents that landlords ought to have

It is essential to note that while asking prospective tenants to fill out the rental application form, the landlord must follow the Federal Fair Housing Act rules. This Act prohibits discrimination of color, race, religion, age, gender, nationality, family status, and other essential aspects. Certain states do not let the landlord ask questions about citizenship or the immigration status of the potential tenants.

Residential Agreement

A drafted lease agreement states the terms and conditions of the deal so that this legal document protects both the landlord and the tenant.

Commercial

Other than including the usual terms and conditions that must be part of the lease agreement, a commercial agreement must also include the use of the premises, permissions granted, and details about its taxes, maintenance, and insurance. And it must have payment and lease renewal clauses too.

Co-signer agreement

In this case, if the tenant is an adult but relatively young, there may not be enough credit history to assess their behavior and surety of paying rent on time. In such a scenario, any elder from the family can be a co-signer. If the rent is unpaid in any month, the co-signer can be contacted and asked to do the needful as that individual takes legal responsibility for the tenant.

Rental inspection report

This document lists everything about the property in detail, so there is no ambiguity concerning all that the property provides. In case of tiffs between the two parties, this document is evidence of what the property has and offers.

Subletting

In some instances, tenants sublet the property for various reasons. The landlord must have a sub-lease agreement before this activity is allowed. Setting clear boundaries is mandatory in this case.

Lease non-renewal notice

This legal document declares clearly that the landlord is not interested in renewing the lease agreement. It indicates to the tenant that they must make arrangements beforehand when the lease is nearing termination.

While executing this clause, it’s essential to do this legally. Check what the state law has to state about when to give the non-renewal notice.

Notice to enter

This section includes the clause wherein the landlord is permitted to enter the property. Usually, almost all states allow the landlord to give a 24-hour notice before entering the property. This notice period, of course, does not hold water in emergencies like fire or flood.

Eviction notice

In a dire situation, when the tenant has breached the agreement, the landlord has a legal right to ask the tenant to vacate the property. They can send the eviction notice to the tenant, asking them to leave the property.

LLC documentation

Along with the insurance, this document adds more security to the landlord. It isn’t mandatory to create this document, but it’s always better to make it. It’s better to be safe than sorry.

Past due rent notice

Also known as a Late Rent Notice or Notice to Pay Rent, this document states the rent or rents overdue by the tenant and the need to pay them immediately (or whenever the landlord feels fit). The document needs to include the following aspects – address of the rental property; total amount overdue until a mentioned date; late fees due to non-payment of rent; names of the landlord and tenant.

Lease renewal letter

If the landlord is keen to extend the lease agreement, the tenant needs to give an extension or renewal offer. If the tenant is also looking to expand the stay, the two parties can modify the existing agreement by including new terms and conditions in the renewed contract.

The renewal letter must start with mentioning the expiry date of the current lease, followed by the renewal notice’s date, the lease renewal’s length, and the new rent amount.

Room rental agreement

A room rental agreement comes in use when a room needs to be sublet. This agreement must include the rent amount and the due date of payment. It must also state the mode of payment and which room is expressly allotted to the tenant to rule out any confusion. In this agreement, mentioning the kitchen, laundry, and other amenities is equally crucial as in the main lease agreement.

Rental application form

This includes the relevant data of a potential tenant. Going through this form gives the landlord an idea of whether or not the tenant is a suitable fit for the property. This document has to include the tenant’s name, contact details like phone number(s), email id, place of work, references, and a few other details.

9.3 Here are the checklists required for tenants and landlords:

For tenants:

• Bills – electricity and gas: both the gas and electricity bills get used by the tenant but remain in the landlord’s name; the tenant has to pay for their consumption. It is important to note that before moving in, the tenants must pay all electricity and gas bills. This way, you ensure you are paying for only what you use.

• NOC (No Objection Certificate) – Many places demand a NOC from tenants, so it is better to keep it ready.
• Proof of Ownership – The proof of ownership of the owner/landlord, so the person can legally let out the property.

For landlords:

• Identity proof: The landlord needs to keep a valid identity proof of the tenant safely. Identity proof is for legal and security reasons. Then, in case of adversity, the landlord knows who to call.

• Work proof: This is essential, so the landlord knows where his tenant works. The landlord knows where to go and whom to contact in an emergency. It also reassures the landlord that the tenant will be able to pay the rent because they get a regular salary.

• Police verification is essential because when the cops clear everything, the landlord knows that the tenant has no criminal history.

• Maintenance and Water charges: In most cases, maintenance is paid by the landlord while the tenant bears the water charges as the tenant is using that.

📖 Also Read: What not to tell a realtor when buying a house?

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1. What’s needed to know before signing a lease agreement?

Before moving in, jotting down the current state of the property is advisable. Later, when there’s wear and tear, it is easy to assess the tenant’s role in the damage done.

From checking faucets to water pressure to electrical wirings, knowing if the property suits the tenant’s standard of living is essential. That is why inspecting the property and noting the current damages is most important. That way, the landlord and tenant are aware of damages done to the property before the tenant has moved in.

Awareness of all the property aspects covered in the rent is essential. For example, does it cover things like trash removal or repairs of electrical appliances, or gas and electricity bills? Clearly stating each and everything the rent covers is important.

Once the two parties sign on the dotted line, it’s usually difficult to change things like – who will pay the electric bill (if the two parties are unaware of this aspect). It is, therefore, wise to have it all written down.

What are the dos and don’ts when customizing a few things on the property? For instance, what if the tenant does not like the color of the paint on the walls? Is the tenant allowed to repaint the house or at least certain portions? It differs from case to case depending upon how flexible and accommodating the landlord is. It is, therefore, essential to have this aspect in writing.  

Sure, landlords are very particular about how their property should look even though a tenant is living there. For example, suppose the tenant has not mentioned any specific work carried out. In that case, the landlord might get upset and deduct money from the deposit – out of anger for no permission taken and wanting to redo the property and restore its look.

Clearly understand each term mentioned in the agreement. Knowing the dos and don’ts of the property will benefit the tenant and the landlord.

Suppose the tenant takes it for granted that his pet will be allowed to stay on the property, but that is not the case. The fine print of the agreement will have this clause. If the two parties do not discuss and say this in the agreement, it can lead to disagreements and fights. 

Communication is key. When starting a new association with someone, especially a stranger, it is always the best thing to do. In almost all cases, the landlord and the tenant are strangers. Therefore, it is important to discuss everything before signing the deal.   

Before signing a lease, things you need to know:

1.  No matter how often the landlord and tenant discuss and agree on the things that are okay with both parties, it is vital to have all of that in writing. Both the landlord and tenant must read every agreement section before signing the legal document.
2. The signing of deals can happen at any time of the month. Mention the date and time of the signing.
3. The dos and don’ts involved if either side wants to terminate the agreement before the mentioned date.
4. There are special occasions when the landlord may want to visit the property for valid reasons. It could be either repairing a portion or fixing something. Then, he must be permitted to enter. Most states state the landlord must give the tenant a notice 24 hours before visiting the premises. 
5. State everything regarding rent – including the date, amount, etc.
6. Mentions aspects like the renter’s insurance details to whether or not the security deposit is non-refundable in the agreement.  
7. Mention the parking dos and don’ts in the agreement to avoid confusion later.

Before moving into a new property, know all about it (at least the basics, if not everything). Knowing the area and the locality is advisable before any deal complete. The tenant must thoroughly understand the locality if the tenant runs a business from the property. Also, whether or not he can run a business on that property will need to be discussed with the landlord. Even if the landlord allows a company to run on the property, it is vital to be aware if that is legally permitted. Most areas have legally divided zones. The awareness of this information is crucial. 

As much as the landlord needs to know if the tenant has any criminal records, it is equally necessary for the tenant to see the history of the landlord.

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2. how to end a Lease agreement?

There are many ways to terminate a lease. A few of them are:

Terminate the lease mutually

There are various reasons why a landlord or a tenant may want to vacate the property before the mentioned date on the agreement. Unforeseen incidents, a new job in a different locality, new priorities, urgent need to renovate – the reasons are innumerable. In such instances, if the landlord and tenant mutually decide to terminate the agreement, they can do so with no further responsibility by either party. Mention all the terms and conditions in writing.  

Anyone else mentioned in the originally drafted agreement also needs to be notified. 

If any additional fees are involved in this new development, include them in the written document. Mutually agree and only then make payments of the final amount. 

Breaking the lease

If it is needed to break the lease, the tenant must write about it to the landlord and inform him of the new development. The lease cannot break unless all tenants on that property break it. If the lease break in phases, it still exists unless the last tenant does not break it.

Subletting

Technically, subletting is not breaking the lease. However, this can be an option if the tenant wants to break the lease. 

Exceptional circumstances

Under this section, the law is tilted more towards to tenant than the landlord. There are various scenarios wherein a lease can become void and unenforceable. A few of them include:

• The landlord increased the lease and decreased services. 
• There are cases when landlords ask the tenants to vacate the property if, for some reason, the tenant has got into a legal entanglement. For example, suppose the tenant has contacted law enforcement for personal safety.
• They are illegally asking the tenant to vacate the property.  
• They are increasing the rent without any prior notice or discussion. 
• They are demanding additional fees from the tenant in case of damage to property caused due to natural calamity.
• We ask the tenant to pay the landlord’s attorney fees for the rental agreement-related matter.
• If there has been a crime on the property where the tenant was the victim and is being asked to vacate.

Constructive Eviction

When the landlord stops maintaining the property, it can become inhabitable. Even after repeated requests, if the landlord does not take responsibility and takes action to make the necessary changes, it’s time to vacate the property.

Service member’s Civil Relief Act

In case the service personnel has been asked to change stations, or one has entered the military; the tenant can vacate the property with their family.

Safe Housing Act

Under this Act, victims of any abuse, especially child abuse or domestic violence, or sexual abuse, can vacate the property if they feel they are at risk of living on that property.

Death of the Tenant

In case of the tenant’s demise, the lease gets terminated either when it expires or after 60 days, starting from the day the landlord heard about it.

When a lease is broken, the tenant may have to pay a fine or forfeit their security deposit. It is best to read the lease agreement carefully to understand the terms of early termination. If possible, try to work with the landlord to find a mutually agreeable solution, such as subletting or re-renting the property. If you are unable to reach an agreement, you may need to seek legal help.

• Breaking a lease can have financial consequences, such as paying a fine or forfeiting your security deposit.
• It is best to read the lease agreement carefully to understand the terms of early termination.
• If possible, try to work with the landlord to find a mutually agreeable solution.
• If you are unable to reach an agreement, you may need to seek legal help.

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How to make an excellent rental Lease even better?

Customize Your Rental Lease

Though an agreement is a legal document that will incorporate all that needs and be mentioned in a lease agreement, it is wise to understand that particular state’s laws and tweak them accordingly. In addition, a lease agreement must be customized to suit the tenant’s needs and wants, with the landlord’s knowledge and permission.

To know about the legal aspect of agreeing as per the latest law of the state, an excellent place to visit is the city’s government website. The other place to look for is the American Legal Publishing Corporation. Check out the details of rights, obligations, security deposits, and others that are important while agreeing.

Be Specific About Rental Terms

The more specific both parties agree, the less confusion later. From mentioning all about pet requirements to utilities to additional fees, if any, it is always good to include all these different aspects in the agreement. But, of course, it is a given that the basic vital information already needs to agree upon.

Add Necessary Clause

If there is any need to mention additional clauses, this can be done. For instance, adding information about attorney fees or a disturbance clause helps it get tighter. 

Update Your Rental Lease

Keeping the lease updated is always better than getting into later arguments. For instance, if there’s an increase in the rental price or if the landlord decides he wants to make his property pet-friendly now, it is essential to add that aspect to the agreement. The updated rental lease must mention every part of this new addition.

Use an Online Lease with Digital Signatures

Using an online lease has multiple benefits. First, it saves time to draft a brand new lease. An existing online template can be customized as per the requirements of the landlord and tenant. 

As it’s online, the document cannot be lost. It is always easily accessible; the best part is that a digital signature is as good as a physical signature. In addition, it is considered valid in a court of law.   

5. What are addendums, disclosures, and notices?

Addendums

There are times when even though both parties have talked, discussed every aspect of the agreement in detail, and mentioned them all down on paper, some clauses have got missed out. An addendum is an additional document to the existing lease that clearly states this particular aspect of the deal in writing.   

Disclosures

This is a document that clearly states all the things that a tenant must be made aware of. Some of the items may not be as obvious as they seem to be. Mentioning those aspects in writing helps in getting more clarity. For instance, if it is an old property and a specific section of the property still has lead paint used on the walls, it is essential to mention that. There could be a chance that the tenant may not want to live on such property due to health issues. 

Notices

These are legal documents that declare the clear intent of the landlord. For instance, if there are two months left for the lease to expire and the landlord has decided not to extend the lease, it is essential to send a notice to the tenant so that an alternative arrangement can be made.  

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The best way to maintain a good, stress-free relationship between a tenant and a landlord is by clearly stating every possible situation on paper and mentioning how one can resolve the issue. Of course, the knowledge of all that’s legally allowed is an added advantage. 

Though there are innumerable differences between leasing and renting, it all boils down to who will handle the maintenance and servicing of the property. It is all about taking responsibility. 

In a leasing contract, both parties have equal rights. However, the case is different in the case of a rent agreement. Though either party can quit the contract at any given point, legally, the landlord has more power than the tenant. The property belongs to the landlord.

Knowledge is power. As laws is different in every state, it is important to know what the state permits before signing on the dotted line. Legal hassles can be lengthy, overdrawn battles on and off the court. No individual wants to go through the grind. Therefore, it is best to know the state’s law, write down every clause to avoid confusion, and ask experts and others before signing the agreement.