A lease agreement is a binding contract between a landlord that agrees to rent property to a tenant in exchange for monthly rent. The tenant will have rights of possession of the property after the lease begins and may only be vacated either at the end of the term or if they violate any of the lease provisions.
Rental Application – To be used by a landlord seeking to screen a tenant before signing a lease.
- Lease Agreements: By State
- Lease Agreements: By Type (10)
- What is a Lease Agreement?
- How Does a Lease Work? (10 Steps)
- Landlord-Tenant Laws: By State
- Common Mistakes When Leasing
- How to Get Out of a Lease
- How to Write a Lease
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
1-Page Lease Agreement – Simple agreement between a landlord and tenant.
Commercial Lease Agreement – For any type of non-residential use such as retail, office, industrial space.
Condominium Lease Agreement – For a residential unit located in a condominium association.
Equipment Lease Agreement – To rent tools or heavy machinery.
Lease with Option to Purchase (Lease to Own) – A standard lease that allows a tenant to purchase the property under predetermined terms and conditions.
Month-to-Month Lease Agreement – Also known as a “tenancy at will” and continues until either the landlord or tenant gives notice (usually 30 days required).
Roommate Agreement – To rent a room in an apartment or house.
Standard Residential Lease Agreement – Fixed term agreement usually for one (1) year.
Sublease Agreement – When a tenant has a lease and re-rents the same space to someone else.
Vacation Lease Agreement – For short-term stays.
Weekly Lease Agreement – For rentals that can be terminated by giving seven (7) days’ notice.
A lease is a contract between a property owner or manager that rents space to an individual or company seeking to occupy it for rent. There are many types of leases with the most popular being a fixed one (1) year term that does not allow either party to terminate until the end date.
- Tenant undergoes a credit check through a Rental Application (Adobe PDF);
- Security Deposit (see laws);
- Move-In Checklist (Adobe PDF); and
- State Disclosures (if any).
Before a lease can be signed, a tenant must be shown the property, negotiated with, and screened to know their credit and background. Below are the steps that should be followed to lease a property from start to finish.
- Step 1 – Marketing/Finding a Residence
- Step 2 – Schedule a Showing
- Step 3 – Screening the Tenant
- Step 4 – Approving or Rejecting the Tenant
- Step 5 – Negotiating
- Step 6 – Signing the Lease
- Step 7 – Taking Occupancy
- Step 8 – Paying Rent
- Step 9 – Renewing/Terminating the Lease
- Step 10 – Returning the Security Deposit
Depending on the location, the landlord should begin marketing the property by posting online and in any local classified publications. In 2017, 37%1 of the US population (43.7 million) were renters and 83%1 of them used the web to find a rental. In addition, 31%2 of renters felt the largest issue in their search was finding accurate information about a particular property.
Therefore, it is important to disclose all details of the property while taking clear photos of each part of every room.
Property for Rent (top 5 websites)
When a tenant asked to view the property, it’s best to make a time that is when the current tenant is not home and that the premises are clean. It’s also recommended that the property is shown during the day advised to promote as much outside light as possible.
- Move-in Date – Before setting up an appointment, ask the potential tenant their move-in date. Many tenants start their search too early and should only meet with tenants if they are looking to rent within 60 days.
- Rental Application – At the showing, make sure to obtain the applicant’s information and consent to run a credit and background check.
After obtaining the tenant’s credentials through the application it’s time to run a credit and background check to ensure creditworthiness. There is a cost to any background check, between $15 to $45, and is usually passed on the applicant.
Screen a Tenant (top 5 websites)
Income Verification – In addition, it is helpful to obtain the last two (2) years of tax returns (IRS Form W-2) and the last two (2) weeks’ paystubs. If the applicant is self-employed then to have the last three (3) months’ bank statements.
Landlord References – The best reference is always past landlords. Be sure to contact the applicant’s current or previous landlord to ask if they paid rent on time, if they are a loud or quiet tenant, and if they left any damage on the premises.
After reviewing the tenant’s credit report, criminal history, and verifying references it’s time to make a decision: (choose one)
If approved, the tenant will go on to negotiate and sign a lease agreement in the next steps.
If rejected, the landlord will be required to send the applicant an adverse action (rejection) letter stating the reasons for refusal and where they can get a copy of their credit and background check.
After the landlord is aware of the tenant’s financial background, it’s time to negotiate. The monthly rent is the most common item that is debated and if they did not attempt to negotiate at the time of applying, they probably will not request a discount.
If the tenant has bad credit the landlord can request the following:
- Additional Security Deposit – In accordance with State laws.
- Increased Monthly Rent – Due to the elevated risk of a tenant with bad credit, some landlords may increase the monthly rent.
- Pre-Pay Rent – In case the tenant loses their job or income. This is always applied to the last months of the lease, not in the beginning.
- Request a Co-Signer – This requires the tenant to find someone else to act as a “guarantor”. A guarantor agrees to pay for any unpaid debts or damage by the tenant in the chance of defaulting on their lease. Use the Guarantor Addendum.
After writing the lease (see How to Write) it’s time for the landlord and tenant to get together and sign with the real estate agent (if any). Furthermore, it is recommended for any lease for it to either be signed with at least one (1) witness or a notary public. If the landlord or tenant would rather electronically sign, the lease can be uploaded via our Homepage and sent to the other party.
After the lease has been signed, all payments including the security deposit, 1st month’s rent, and any other fees must be paid to the landlord. Upon successful payment, the landlord will issue access to the tenant in the form of keys, fabs, or access codes. All entries must be given to the tenant including any common areas or mailboxes.
During the course of the lease, the tenant will be obligated to pay rent on a monthly basis. It is recommended to convert tenants to pay online or automatically via ACH. In a 2019 study3, consumers made 74% of their transactions with non-cash payments and 85%4 of tenants that pay rent online successfully pay rent the next month. Therefore, it’s best to obtain the tenant’s ACH details or use an online service to collect rent on behalf of the tenant.
Accept Rent Online (top 5 websites)
- Cozy.co (Free ACH, 2.75% cc fees)
- Zillow (Free ACH, 2.95% cc fees)
- Avail.co ($2.50 ACH, 3.50% cc fees)
- RentPayment.com ($4.95 ACH, 2.95% cc fees)
- PayYourRent.com ($2.50 ACH, 2.75% cc fees)
At the end of the lease term, the landlord and tenant must decide whether to move-out or renew the lease. If renewing, the landlord can send the tenant a Lease Extension Amendment that keeps all the terms of the current lease while extending the date. If the landlord decides to change any other terms, such as increasing the rent, it can be added as well.
If the tenant decides to move out of the property or the landlord decides to not renew the lease, the landlord will send a Notice Not to Renew Letter that will inform the tenant to vacate the premises on the lease end date.
After the tenancy has completed, the landlord will be required to return the deposit paid at the beginning of the lease term in accordance with State Security Deposit Laws. The deposit must be returned to the tenant, less any damage left on the property, to the forwarding address given by the tenant.
If the landlord deducts any amount from the security deposit, an itemized list of the damage must be given to the tenant.
Security Deposit Laws
Common Mistakes When Leasing
There are three (3) mistakes made by landlords and tenants when applying for a lease:
1. Negotiating BEFORE the Rental Application
The tenant and landlord do not know the creditworthiness of the tenant. There is no reason to begin the negotiating process on either side without knowing the financial background of the tenant.
2. Move-in Date Beyond 45 Days
The landlord should never agree to a move-in date beyond forty-five (45) days. Otherwise, the landlord runs the risk of losing more than a month’s rent.
3. Not Requiring the Tenant’s Social Security Number (SSN)
Due to the rise in identity theft, landlords have been hesitant to require the tenant to write their social security number on the rental application. This must be a requirement in order to view all available public records on the applicant.
Frequently Asked Questions (FAQ’s)
How much does a Real Estate Agent get paid?
A real estate agent is paid the amount due as stated in their listing agreement. This may either be from the agent representing the landlord or tenant. For rental properties, this is commonly between 10% to 15% of the lease term (usually 12 months) multiplied by the monthly rent.
If there is co-agency, both agents will share the commission amount.
Does a residential lease need to be witnessed or notarized?
Recommended but not required.
What is Prorated Rent?
- Prorated Rent Calculator: www.jsjsss