A standard residential lease agreement is a binding contract formed between a landlord and a tenant over the rental of a property for an average length of one (1) year. The agreement sets out a list of requirements that both parties agree to follow for the full length of the lease, covering topics such as rent payments, utilities, security deposits, guests, pets, moving out, and more.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
By Type (4)
Apartment Lease Agreement – For renting out duplex, triplex, studio, loft, and other apartment types.
Condominium Lease Agreement – Allows condo owners a means of easily leasing their unit(s) when they are not in use.
Home Lease Agreement – For leasing out an entire home to one (1) or more tenants.
Realtor Lease Agreement – The official versions used by Realtors; specific to each state.
What is a Residential Lease?
A residential lease is a contract used for providing legal protection for a landlord (lessor) and tenants (lessees). Landlords require tenants to sign a lease to have physical proof that the tenant(s) agreed to pay rent to the landlord for a certain amount of time. Without a lease agreement, it would be difficult for a landlord to hold the tenant(s) liable for paying rent, repairing tenant-caused damage, and other responsibilities.
On the other hand, the agreement protects tenants from being taken advantage of by landlords, ensuring they have access to a safe and habitable rental, are not disturbed by neighboring tenants (or the landlord themselves), and are guaranteed their right to live in the rental for the length of time specified on the contract. It’s important to remember that tenants are often protected by the state’s landlord-tenant laws. While each state is different, these laws ensure tenants have the right to terminate the agreement if the rental is unsafe to live in (for example).
Who Needs a Residential Lease Agreement?
Anyone that allows another person or entity to live in a space they own in exchange for monetary payment should use a lease agreement. This applies regardless of whether or not the owner knows the tenant(s) personally. A lease should be used by:
- Landlords and property management companies;
- Homeowners looking to lease their property for part of the year; and
- Those looking to rent to friends and family.
Important Lease Clauses
- Abandonment Clause
- Arbitration Clause
- Automatic Renewal Clause
- Breaking the Lease (“Early Termination”)
- Guarantor Clause
- Escalation Clause
- Military Clause
- No Smoking Clause
- Pet Clause
- Sale of Property Clause
- Security Deposit Clause
- Sublease Clause
- Waterbed Clause
An abandonment clause allows landlords to remove a tenant’s possessions in the event the tenant has “disappeared” from the premises without providing notice to the landlord. It’s important that the state laws are consulted to ensure an abandonment clause is enforceable before using.
Arbitration is a process of dispute resolution in which the parties to the lease have a third (3rd) party make a binding decision regarding a dispute they have with one another. By using arbitration, the parties avoid going to court, which is often a costlier, more time-consuming process. The process shouldn’t be confused with mediation which is the act of having a third (3rd) party facilitate conversation between the parties, the major difference being that the mediator cannot make a binding decision (where an arbitrator can).
An automatic renewal clause (also known as an “Evergreen clause”) causes the lease agreement to renew for a certain length of time (typically the same term as the original lease) once the lease expires. If the landlord or tenant(s) do not provide the other party adequate notice of their intent to terminate the lease, they will automatically be bound to a new lease agreement. This clause does not just bind tenants – if the landlord forgets about the clause and expects the lease to terminate upon the date listed on the contract, they have no choice but to re-lease the rental to the tenant(s) for another term (potentially locking-in tenants to a below-the-market rate).
While a landlord hopes to never need this clause, it should be included to ensure the parties understand the steps they need to take if they want to “break” the lease legally. This provides the landlord with a means of collecting unpaid rent until a new suitable tenant is found.
The term “guarantor” is often used in conjunction with “cosigner”, although the two aren’t exactly the same. A guarantor is an individual that is responsible for making rent payments if the tenant is unable to, whereas a co-signer is typically a tenant on the lease that is responsible for making rent payments if the other tenant is unable to. While not necessary on every lease, it is recommended landlords use the clause for tenants they deem as a “financial risk” after conducting screening checks.
In addition to the clause below, the landlord should have the guarantor sign a separate guarantor agreement.
An escalation clause, more commonly known as a “rent escalation clause”, allows the landlord to adjust the rate of a tenant’s rent on a specific timeline. This ensures the landlord has a means of keeping the rental on-pace with rental market rates. Increasing the rate on a percentage basis is recommended.
Tenants that are in the military have a right to break a lease in the event they are called upon for active duty. However, landlords are allowed to include a clause that requires the tenant to provide a notice of at least thirty (30) days after the last rental payment. As an example, assuming the tenant received orders on the 12th of March requiring them to leave in a month and they gave their notice to the landlord that same day, they’d be obligated to pay rent through the 30th of June.
A simple clause that either, denies, approves of, or restricts a tenant’s right to smoke on the rental premises.
States whether or not the tenant(s) are permitted to have pet(s) on the Premises. If a landlord does permit a tenant to have a pet, they should require the tenant to pay an additional deposit for the pet due to the increased likelihood of pet-caused damage. This is often tacked-on to the security deposit. Landlords should check their state’s landlord-tenant laws to ensure a pet deposit can be collected.
This clause comes into play in the event the rental property is sold while a tenant is currently leasing it. The clause is used to either allow the new owner permission to terminate the lease (so long adequate notice is provided) or restrict their ability to terminate the lease. Tenants’ will obviously prefer having the security in knowing their lease will be unaffected if a sale were to occur.
One of the most commonly-used clauses in leases, a section covering security deposits should be used in every lease agreement. A security deposit is a monetary amount paid at the beginning of the lease by the tenant(s). Typically equivalent to one (1) or two (2) months of rent, the deposit is refunded to the tenant at the expiration of the lease so long the rental unit is left undamaged and the tenant(s) did not miss any rent payments.
Landlords are highly advised to require their tenants to consult with them prior to subletting. This is because landlords make a significant effort in ensuring the tenants they lease to have been thoroughly vetted through the use of a rental application. If they allow their tenants to sublet freely, the landlord runs the risk of introducing a troublesome subtenant into their property.
Although waterbeds were mainly a fixture of the ’80s, where they made up between twelve and fifteen percent (12-15%) of the entire bedding market, they can still be found today (albeit very rarely). A waterbed clause is a rather simple statement either permitting or denying tenant’s the right to use a waterbed. Why would a landlord not want their tenants to have a waterbed? Because the bed type is typically filled with hundreds of gallons of water, in the event they burst, significant amounts of damage can occur to the rental (and the floors/units below).
Frequently Asked Questions (FAQ)
Does a residential lease need to be notarized or witnessed?
Because lease agreements do not need to be recorded with a county clerk, there is no need to have them notarized. The same goes for witnesses, although some states such as Florida require leases that are longer than one (1) year to have the landlord’s signature witnessed by at least two (2) witnesses (§ 689.01).
Can a landlord change the lease agreement?
No. Not unless 1) both the landlord and tenant(s) sign an amendment to the lease, or 2) the lease contains language that allows the landlord to change a certain aspect of the agreement on a whim, such as permitting subleasing.
Lease vs. Rental Agreement (Month-to-Month)
In short, a lease agreement is a binding contract that has a known beginning and end date, regardless if it’s for two (2) months, half a year, or five (5) years.
Rental agreements, more commonly known as “Month-to-Month Lease Agreements”, are contracts that automatically renew at the end of each month. This can continue on for years if neither party wishes to end the agreement. To end the contract, either party will need to provide a written notice to quit, typically thirty (30) days in advance.
Can a Lease be used for Renting out a Room?
Yes. Although a full-fledged residential lease is most likely overkill. A roommate agreement is all that is needed.