A lease agreement is a legal contract between a landlord and tenant for the use of commercial or residential property in exchange for monthly rent. The terms of the agreement are negotiated by the parties and, if the tenant is approved after filling in a rental application, a lease is written.
Commercial Lease – For any type of commercial space for business use such as industrial, office, or retail. There are three (3) types of commercial leases: Gross Lease, Modified Gross Lease, Triple Net (NNN) Lease.
Month-to-Month Lease – Otherwise known as “tenancy-at-will”, is a rental contract that can be terminated in either 30 days or the minimum termination required by the State.
Residential Lease – A fixed-term rental contract between a landlord and tenant whereas payment is due every month, usually on the first (1st) day, and the term is commonly for one (1) year.
Roommate Agreement – A roommate agreement outlines the terms when 2 or more people live together in a residence while sharing the common areas such as the kitchen, bathroom(s), and living areas.
Sublease Agreement – A tenant (“sublessor”) who is currently is under a lease decides to rent a portion of the entire space to subtenant (“sublessee”).
A lease is only as good as the form it is written and the individual that desires to rent the space. Due to each State having its own specific laws regarding disclosures and security deposits a landlord may follow the instructions below in order to create a binding arrangement with the tenant.
Through the Rental Application, a landlord will be able to view a tenant’s background and verify with their employer to see the character of the person. Recommended sites to perform this lookup on the tenant include Experian ($14.95), e-Renter.com ($19.95), and SmartMove ($25).
This can be identified by confirming the following:
The average credit score in the USA is between 660 to 720. Therefore, if a prospective tenant has a higher score, greater than 720 , they may be able to negotiate a better rent with the landlord knowing that they will be reliable to pay the rent on time every month.
Although, for individuals below 660 , it may take extra credentials such as proof of income or employment, a larger security deposit, and pre-paying a portion of the total rent in order to make the landlord comfortable with the arrangement.
If the prospective tenant has any criminal blemishes on their record then this is up to the landlord to justify how credible the charge that’s listed. If the property is located with families and other professionals of the community then it may pose a larger risk than if the real estate is located in an urban setting.
Unless the prospective tenant is retired or can prove they have a sufficient amount of cash, along with a high credit score, it is ideal to find a tenant that has a job at the present time. This can be completed by having their employer authorize an Income Verification Form (Adobe PDF, Microsoft Word) along with the individual producing pay-stubs for the last 2 weeks.
Past Tax Returns – If the landlord wants to go even further they can request tax returns for the last 2 years with IRS Form W-2 (for employees) and IRS Form 1040 (if self-employed).
The landlord, at their discretion, can ask for a Reference Letter (Adobe PDF, Microsoft Word) from the most recent lessor to ask about the character of the renter in addition to requesting if the individual paid on-time while acting as their tenant. Although, most tenant background check websites will be able to catch if the individual has ever been evicted in the past.
This is usually a waste of time and most landlords no longer verify references other than the employer and past lessor. As the individual will, most of the time, add their best friends and colleagues that will be scripted to say the best and most positive things even if the individual is not of good moral character.
There are four (4) types:
This is the most common. Lasts for a period of 1-year and cannot be terminated by the landlord or tenant.
Also referred to as a “Tenancy at Will”, has no end date but can be canceled at any time by the landlord or tenant by giving the other party written notice, usually 30 days, that they will be terminating the agreement.
This is a contract that binds the tenants that are collectively renting from a landlord. Items such as cleanup times, who pays for what room, and any other agreements between the roommates can be created.
This is when a tenant has a lease, usually a 1-Year term, and they are forced to vacate the premises while still being liable for the rent until the end of the agreement period. They can, with the landlord’s permission, rent the space to someone else in order to help pay for the rent.
At this point, the terms and conditions of the lease should be negotiated by the parties with, most importantly, the monthly rent. For the landlord and tenant to get a better idea of the market in their area use Apartments.com or Zillow to view related properties and their monthly asking price.
After the aforementioned items have been agreed upon it is time to write the Agreement.
A security deposit is collected by the landlord in the chance that the tenant defaults on their lease or if there is damage that is left at the end of the lease term. The former allows the landlord to salvage 1 or 2 months of rent during any eviction period which can usually take this amount of time.
Although, the maximum amount the landlord may request for the security deposit depends on the State where the property is located. The limit is determined by the rent amount and equivalent to (see below):
In most occasions, the agreement is signed between the landlord, tenant, and agent (if any). Unlike other legal contracts, it is not necessary to have a notary public as a witness. It is important that every State’s laws have been observed in regards to its legal Statutes and Disclosure Forms. Therefore, it is best to verify with your specific State to ensure all requirements are being met.
The landlord will usually wait until the 1st month’s rent and security deposit (if applicable) have cleared before giving the tenant access to the property. If the rent has been prorated, meaning the tenant is able to obtain possession of the premises before the start date, then the money for the initial period will be required as well.
Afterward, the tenant may be granted occupancy where all necessary keys, fabs, and access will be transferred and the tenant will officially be allowed to move-in.
If the landlord is in violation, the tenant will be required to send a certified letter stating the breach and after a certain number (#) days pass the tenant will be allowed to terminate the lease. In addition, the tenant may be entitled to damages.
If the tenant is in violation, the landlord will be required to give the tenant a notice to quit that describes the violation and how to “cure” the issue. The tenant will only have a certain number (#) of days in accordance with State law. For example, in most States a tenant that it late on rent will commonly have three (3) to fourteen (14) days to pay or vacate the property.
In order to cancel a standard lease, the tenant will be required to get the landlord’s written consent to terminate the contract. The greatest fear of a landlord is to evict a tenant which can lead to a loss of rent for 3-4 months. Therefore, most landlords will accept a termination request if the tenant can exemplify financial hardship.
In most cases, the landlord will require the security deposit to be used as a fee for granting the termination.
This question is ultimately up to the tenant. Landlords will require that the tenant’s income is greater than 40 times the rent amount. For example, if the rent is $1,000 per month the tenant will need to make at least $40,000 per year.
A lease to own agreement is when the landlord and tenant come to an agreement for the renting of the home, just like a standard lease, with an option to purchase before the lease end date. The terms of the purchase portion of the agreement are up to the landlord and tenant.
Yes. If the landlord does not accept credit card, the tenant may use Plastiq (2,5% fee) to have the funds sent by check in the mail, ACH, or wire transfer.
In most standard lease agreements, the tenant is prohibited from subleasing which is the act of renting the property to someone else. If the tenant would like to sublease the property, in most cases, they will have to get written consent from the landlord. The landlord has every right to reject the request.
Lead-Based Paint Disclosure – Federal law, 42 U.S. Code § 4852d, requiring all residences built before 1978 to have this document attached to the lease and signed by the tenants. In addition, the landlord must give This Handout (Protect Your Family From Lead in Your Home).
Move-in Checklist (Inspection) – Some States require this form to be completed by the landlord and tenant at the start of the lease if there was a security deposit collected. This will allow both parties to write down any existing damage on the premises in the chance the landlord claims that damage, that was pre-existing, was the fault of the tenant.
