A lease agreement might be for a residential or commercial property. Before going over the elements of a lease agreement, it’s important to understand the most commonly used words in the real estate industry. What exactly is a lease agreement?
A lease agreement is a contract between two parties, the lessor and the lessee, in which the lessor allows the lessee to use his property in exchange for rent for a fixed period. In simple terms, a lease agreement is a legal instrument in which a landlord rents his property or asset to renters for a certain period in exchange for money.
It is essential to create a thorough and effective leasing agreement that protects all parties involved during the lease term. While many landlords start with boilerplate lease agreements, all parties can negotiate the language and terms until the lease is signed, at which point it becomes a legally binding instrument.
Lessor Vs Lessee
Lessors or landlords are the legal owners of the property who provide another person, the lessee, with the right to use it for a set period. Lessee pays less monthly, weekly, or annually in exchange. Even though the lessor retains ownership of the asset, he has fewer rights to it during the term of the agreement. One of these restrictions is that, because of his limited access to the asset, the owner can only enter with the lessee’s permission. Before the actual time of the visit, he must notify the lessee of any maintenance that has to be done on the asset or property.
However, if the lessee damages the property or uses it for illegal activity, the lessor has the authority to remove the tenant or terminate the lease agreement immediately.
On the other hand, lessees, renters, and tenants are those who are granted the right to use a property or asset in exchange for regular payments. Lessees are responsible for keeping the property in the same condition as it was previously. Any property damage must be repaired before the end of the contract period. Lessees are not permitted to make any modifications to the property without the permission of the lessor.
Types Of Leases
People can lease a variety of products, including automobiles. However, lease agreements are most commonly used for real estate, both residential, and commercial. The following are some of the most popular forms of leases:
- Commercial lease – includes commercial buildings, offices
- Family member lease –allows blood or marriage-related family members to pay rent while residing in the same house.
- Hunting lease – hunting on private property.
- Condominium lease–a residential complex where tenants share part of the building’s facilities.
- Lease-to-own lease – allows a tenant to purchase the property from the landlord.
- Month-to-month lease – This is a form of the short-term rental arrangement. The term “month-to-month” refers to a leasing agreement that lasts for 30 days.
- Parking space lease – allows using a parking space on private property.
- Room lease – renting a property.
- Standard lease – The most traditional type of landlord-tenant agreement for renting a home. It is a fixed-term contract, that normally lasts up to one year.
- Weekly lease – a type of lease that lasts for a week, like hotel rooms, booking in a resort, etc.
- Short-term lease – typically lasts less than 6 months.
- Sublet lease – a type of leasing in which the existing tenant rents for another tenant or third party.
Essentials Of Lease Agreement
Lease agreements can differ according to the need and type of lease. A landlord or a renter can add a clause to their lease agreement that is acceptable to both. Following are the essentials of a basic lease:
- Contact Information – Includes information on the landlord as well as all the tenants living on the property
- Property Details – includes location, area (sq./ft.), and other amenities
- Lease Specifications – lease specifications include the type of lease- residential, commercial, or any other and the duration of the lease.
- Rent Details – Rent includes the amount which is paid to the landlord each month
- Rights And Obligations – includes the rights of both landlords and tenants
- Dispute Resolution – Outline the methods for resolving any property or lease agreement problems.
- Security Deposits And Fees – outline deposits or any other additional fees
- Occupancy Limits – including how many people can stay on the property
- Restrictions – outline the restrictions like no modification to the property, what to use or what not to use, etc.
- Pets Policies – includes whether any pets are allowed or not
- Maintenance And Repairs – List what the landlord is responsible for in terms of upkeep and repairs.
- Utilities – Identity who is liable for which utility payments.
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Some Common Terms In Lease Agreement
Additional documentation in the form of addenda, disclosures, and notices is required in some leases. Disclosures are usually included with the initial lease, but addenda and notifications might be added afterward.
Addenda Or Addendum: An addendum is an item that is added to an existing lease or a proposal to change something about a lease that already exists. A lease agreement for a semi-furnished flat, for example, provides the use of all of the property’s furniture. However, the tenant does not want the furniture because he already owns it.
Disclosures: The term “disclosure” refers to information made public about the property. It assists tenants in comprehending all aspects of the rental property.
Notices: Official announcements are made in the form of notices. For example, the tenant may give notice for ending the lease.
It is vital to know and understand all components of an agreement, as well as your rights and obligations as a landlord and a tenant while leasing or signing an agreement. This is essential to the leasing agreement’s success.