You can call it many things -- a commitment, contract or even compromise-- but a lease is a legal agreement between the tenant and landlord that solidifies the arrangement with signatures. Do you know how to read a lease, or are there terms and phrases you just don't understand?
Used for commercial and residential rentals, leases explain in detail the rights of both the landlord and the tenant. After reading and signing the lease, both parties are bound by law to keep their end of the bargain unless there is just cause for either party to break the agreement.
This guide is a brief introduction to lease terms. It is important to understand the differences, so you recognize what you are agreeing to with your signature.
Common lease terms you should know
The terms of lease are the most important aspect of the agreement, since they bind the tenant -- to a particular amount of time, to a particular amount of rent, to a particular set of rules. By knowing the different terms, you will be better informed when it comes time to sign your lease.
- Fixed term tenancy: The fixed-term lease is fixed. As the most common contract used, it is usually written for six months to as high as 10 years and remains in effect for the amount of time mentioned. By signing a fixed-term lease, you are agreeing to stay in the residence for that amount of time, no more and no less. If you decide to leave early or stay beyond the date, you will most likely be penalized, which is why it is important to abide by the move-in and expiry dates.
- Month-to-month: The month-to-month lease, otherwise known as periodic lease, is a bond that states you will inhabit the rental for at least 30 days. The two important aspects of signing a month-to-month lease are informing your landlord you plan to move before the lease renews and knowing that your landlord only needs to give you 30 days upon termination. A month-to-month contract is almost always automatically renewed, and you are mandated to stay for at least one more month. This type of lease is most often used for college apartments and vacation rentals.
- Holdover: Also known as a tenancy at sufferance lease, a holdover agreement is the understanding that the tenant has decided to stay in the respective unit beyond the expiry date. The landlord will not penalize them as long as they pay the rent on time and follow all the rules. Unlike a fixed-term or month-to-month lease, the landlord can evict you from the unit with only 24 to 48 hours notice if they choose.
- Tenancy at will: Quite opposite to the aforementioned leases, the tenant and the landlord may terminate the agreement at any time after giving an evenhanded notice to the other party.
Pros and cons of lease terms
Like almost every agreement, there are pros and cons to setting in stone certain provisions. Before signing a lease, you should weigh the positive and negative aspects of the agreement. Ask yourself realistically if the decision you are about to make is best.
- With a fixed-term lease, you are guaranteed an amount of time but must leave if the landlord chooses to rent to another tenant afterwards
- With a month-to-month lease, you are not obligated to make a long-term decision but could then lose the unit in a month's time
- With a holdover, you are not burdened with leaving on a certain date but may have to exit at any given notice
- With a tenancy at will lease, it's empowering to leave when you want, but you risk the landlord terminating at any time
Standard and special terms in a lease
Most residential leases, regardless of how long the length, are based on a set of general terms that include, but are not limited to:
- Tenant names and minor children
- Move-in and move-out date
- Address of location
- Rent price and rent control clause
- Security deposit and damages that forfeit it
- Proof of renter's insurance
- Renewal date or 30 day notice of exit
- Prohibited items or actions that can result in eviction
Within the general terms of lease, a standard and special terms section will most likely, if not always, be noted.
Standard terms are the details that describe what the tenant and landlord are allowed to do, and the special terms are particular facts that note certain instances that may or may not take place.
Landlords will most often use a form lease which is a pre-printed document that lists the aforementioned terms. The general, standard terms will be for all rentals, and the special terms will be specifically for that unit or area. For example, an apartment near the shore will mention coastal flooding, but an apartment in a landlocked state will not.
Assigning the lease to a new tenant
If you are at fault and do not have a legal reason to vacate, you can opt to assign your lease to another tenant upon your landlord's approval.
However, a property manager has the right to refuse the new tenant if they have insufficient income or bad credit. If the landlord has no good reason to deny the tenant, a small claims court judge can easily overrule the rejection and allow the tenant to serve the rest of your term.
If you are unable to assign the lease, you can still break the lease with little penalty. To avoid any legal action, negotiate with your property manager -- letting them know you are willing to pay as much as you can a month until the final cost is met or agreeing to forfeit your security deposit.