These Are 10 Lease Terms You Should Include In Your Rental Agreement

Fundamentally, a lease agreement or rental agreement is a legal contract between a landlord and tenant that ensures access to a rental property in exchange for payment. The things the tenant can and cannot do with that property, the terms of payment, and the responsibilities of each party are all defined in lease agreements.

A lease contract can range drastically in size and scope. Some landlords spell out every scenario and address every potential conflict in painstaking detail. The result can be a stack of paper that would make a tree shudder. Other landlords, with a penchant for brevity, limit their lease agreement to only a page or two. Neither is right nor wrong, and every lease agreement should be constructed to fit the unique circumstances of that particular landlord and tenant. But there are terms and provisions that should be included in every lease agreement, and as a landlord, it’s important that you know these basic terms of tenancy.

Disclaimer: The materials and information provided by Innago, particularly in respect to drafting a lease agreement, are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

What Constitutes a Legal Lease Agreement?

Before we jump into the terms and provisions necessary for any basic lease agreement, let’s start with the characteristics that must be present to make that lease agreement legally enforceable, whether it’s a residential lease agreement or a commercial one.

All lease agreements must be signed by the landlord and tenant with the following:

• Legal capacity – All individuals entering the agreement must be at least 18 years of age and must be mentally competent.
• Objective – The objective of the agreement should be legal. If the property in question is rented for illegal purposes, the agreement is deemed invalid by default.
• Offer and acceptance – The agreement is only valid after it has been accepted and signed by all participating parties.
• Consideration – Consideration, in legal contracts, refers to an exchange of value. For a lease agreement, consideration is made in the form of rental payments. For any agreement to be legally binding, a consideration (or rental rate) must be included.

Clauses Necessary for a Lease Agreement

If the above four requirements are met while signing the lease, then it is legally enforceable. But without the right provisions, there’s nothing to enforce. Here are then fundamental clauses that make a lease a lease:

1. Parties Involved:

Your lease agreement should explicitly state the names of all tenants who will occupy your property, regardless of age. Every tenant above age eighteen should sign and accept the lease terms. This makes it possible to hold all tenants legally responsible and accountable to the terms specified.

2. Property Address:

The lease should also clearly state the address of the property to be rented. You should mention its full address, including the street name, unit number, city, and state. You should also indicate any additional space to which the tenant will be given access (e.g., a storage unit or parking spot).

3. Term of Lease:

Will your lease be month-to-month or a fixed term? Always define a start date and the rules of termination, whether that means the tenant or landlord must give a thirty-day notice, or there is an agreed upon lease end date.

4. Rental Amount Due:

The lease should specify the exact rent amount to be paid, the frequency of payment (typically monthly rent), and the date on which rent is due. How tenants should pay rent should be explained too, such as via an online rent payment service like Innago, writing a check, or electronic funds transfer. Additionally, you should mention any grace periods for tenant rents and late fees that might be charged. Remember that both terms – grace periods and late fees – can be regulated by your state’s laws, so do your research to make sure your lease is compliant. You should also mention the acceptable methods of rent payment (it’s usually best to avoid accepting cash).

5. Acceptance:

All parties need to officially and legally accept the agreement. A physical or digital signature acts as a sign of acceptance, making the agreement legally binding.

Other important terms include in rental agreements:

6. Security Deposit and Other Fees

Include the exact amount of money you will be charging for the tenant’s security deposit and the circumstances that allow you to deduct from it. Specify how and when you will return the security deposit upon tenant move out. Also mention if you will be charging any additional fees like move-in fees, cleaning fees, etc., and whether these will be refundable or not.

7. Maintenance and Utilities

Declare the duties and responsibilities of tenants and landlord with respect to maintenance and utilities. The lease should clearly state which bills the tenant needs to pay and those that the landlord needs to cover. In case of any repairs or damages, the liability of both parties should be clearly defined (note that while damage to real property is covered by landlord insurance, damage to tenants’ personal property is covered by renter’s insurance policies).

8. Entry to Premises

The lease should cover when and under what circumstances either the landlord or property manager is allowed to enter the premises being rented. You should also include how much advance notice will be provided before entering.

9. Pets

Whether you wish to allow pets in the rented property or not should be addressed directly in the lease that is for a residential property. In case you do choose to allow pets, you should define what is acceptable, including their number, type, size, etc. If you plan to charge a pet deposit or a pet fee, this too needs to be indicated in the lease.

10. Termination

Your rental lease agreement should specify the lease termination date, as well as any procedures for renewing (such as how far in advance tenants must request an extension of the lease term or renew for another term). Leases should also explain procedures and fees for early termination, for situations in which a tenant decides to move out earlier than the lease termination date and does not want to continue paying rent after a certain date.

Don’t forget to include a clause that clearly explains what would happen if any of the parties violate the lease agreement, including monthly rent payment defaults. You should address the various scenarios where termination and eviction is possible as well as the costs the tenant will be responsible for if they are evicted, such as attorney fees.

Conclusion

As you mature and grow as a landlord and property manager and encounter various problems and challenges in the leasing process, your lease will likely grow with you, but if all ten of the above terms and clauses are addressed, you’re off to a great start for strong landlord tenant relationships.

For help with your first few leases, there are a variety of lease agreement templates and sample lease agreement pdfs available online for as well as through Innago. You can create your own lease agreement, but be sure to check state and local laws for circumstances unique to your situation. There are more differences for leases depending on whether they govern residential or commercial property, and the property owner should be aware of local laws that regulate leasing as well. Lastly, always ensure your tenants have a clear understanding of their responsibilities with respect to their lease.

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