What Is a Lease Agreement?
A Lease Agreement, also known as a Lease Contract, is a written document that makes the relationship between two parties, a landlord (lessor) and a tenant (lessee), official and legally binding. This contract is signed when the tenant wishes to rent any residential or commercial property. Usually, a lease agreement outlines the terms and conditions of the tenancy and describes the rights and obligations of both parties. A thoroughly written agreement is imperative for the interests of the landlord and the tenant – it prevents misunderstandings that could potentially lead to a court dispute.
Types of Lease Agreements
There are various types of lease contracts. You can enter into a commercial lease – an arrangement between the landlord and the business where the property is leased for commercial use. A residential lease is an agreement between the landlord and the individual where the lessee does not use the property for the profit maximization or commercial purpose. This kind of lease is the most common and is used to lease a house, apartment, or rooms. Land, farms, equipment, vehicles and even animals can be leased as well.
- A lease-to-own, also known as a rent-to-own, is a traditional lease agreement that gives the tenant an option to buy the rental property after the tenancy begins. This contract is usually made up of two parts: a standard lease, and an option to purchase.
- A month-to-month lease is an agreement that allows you to rent for a month at a time. The rental price can be changed at any time with the appropriate notice. This is the best option for individuals who are not sure about how long they will use the property.
- A sale and leaseback transaction is an agreement in which one party purchases property, land, or equipment from another party and immediately leases it back to the seller under specific terms. The seller could be a commercial bank, an insurance company, or an individual investor.
Is There a Difference Between a Lease Agreement and a Rental Agreement?
A lease agreement is often confused with a similar document – a rental agreement. Both agreements are filled out prior to renting property, they outline responsibilities and duties of the parties and contain crucial provisions to make sure the landlord and the tenant are protected, as the conditions of the lease cannot be altered unilaterally. A rental agreement allows each party to change the terms of the contract at the end of each month, for example, the landlord can raise the amount of the rent or the tenant may notify the landlord about the willingness to vacate the premises.
What Should Be Included in a Lease Agreement?
A lease contract acts as a guidebook by which the landlord and the tenant define the rules of using the property and the repercussions in case of their breach. Every lease is different, but usually, these documents contain the following information:
- Names and contact information of the parties;
- Premises, its address, and description. It may be simple, for example, just the address and the number of the apartment, but it should be identified, otherwise, the agreement cannot be valid;
- Duration of the agreement. List the date when the lease begins and ends to have a clear understanding of when the legal relationship and the promises begin and finish;
- Amount of rent and the method of payment. The agreement should also contain the terms for late rent;
- Security deposit. Commonly, the landlord can deduct the unpaid rent and costs to repair damages from the deposit;
- Access permission. State when and for what reason the landlord can visit the property. This clause should define reasonable notice and explain the rights of the tenant;
- Subletting. The landlord may allow the tenant to sublet the property to someone else;
- Termination of the contract and the right to renew the lease.
A lease agreement is valid even without the notarization. To make the document enforceable, both parties need to indicate their intent to enter into a contract and sign the papers.