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Fundamentally, a lease agreement is a legal contract 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 the lease agreement.

Leases 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 occupancy. 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.

Every lease agreement must be signed 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 the 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.

  1. 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; for example, a storage unit or parking spot.

  1. 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.

  1. Rental Amount Due

The lease should specify the exact rental amount to be paid, the frequency of payment, and the date on which rent is due. Additionally, you should mention any grace periods for payment and late fees that might be charged. You should also mention the acceptable methods of rent payment (it’s usually best to avoid accepting cash).

  1. 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:

  1. Security Deposit and Other Fees

Include the exact amount of money you will be charging for your deposit and the circumstances that allow you to deduct from it. Specify how and when you will return the 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.

  1. 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.

  1. Entry to Premises

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

  1. Pets

Whether you wish to allow pets in the rented property or not should be addressed directly in the lease. 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.

  1. Early Termination

Your lease should ideally include a clause that clearly explains what would happen if any of the parties violate the lease agreement. You should address the various scenarios where termination is possible as well as specify if you charge a termination fee.

As you mature and grow as a landlord and property manager and encounter various problems and challenges, your lease will likely grow with you, but if all ten of the above terms and clauses are addressed in your lease agreement, you’re off to a great start. Of course, be sure to check state and local laws for circumstances unique to your situation, and always ensure your tenants have a clear understanding of their responsibilities with respect to their lease.

 

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