A good residential lease agreement should provide the parties with clarity, predictability, and solid legal protection for each part of the rental process. The following guide will walk you through the common questions and concerns when creating this agreement.
All lease agreements fall into two basic categories in terms of the rental period: fixed and periodic. A fixed-term tenancy is a tenancy with a set end date, usually one or two years from the start date. A periodic tenancy does not have a set end date and continues to renew for additional periods (weekly, monthly, or yearly) automatically until one or both parties decide to terminate the tenancy.
Some states provide tenants under fixed-term tenancies with slightly different rights than those of periodic tenancies. This difference is most apparent in terms of the tenant’s rights concerning eviction and ending the lease. Tenants must consult their leases and state law to know how to properly cancel the lease. LegalNature’s agreement requires tenants to give 30 days’ advance notice of their intention not to renew a periodic lease. Landlords wanting to end a periodic lease must provide appropriate notice according to state law, which is usually 30 days.
If you select a fixed-term tenancy, then the agreement will automatically expire at the end of the term. If the parties wish to renew the agreement, then they can simply sign a new lease agreement on the same or different terms. In the event that the tenant continues to occupy the property without receiving an eviction notice, then the agreement automatically converts to a month-to-month periodic lease until terminated by one of the parties.
Rental payments are typically due on a monthly basis, but you can choose to require payment weekly, twice per month, every two months, every six months, or once per year.
You can choose to allow multiple payment methods, such as by credit card, cash, check, money order, online, or wire transfer as a convenience to the tenant. You can also specify multiple payment locations where payment is accepted, such as in person, online, or mailed to a certain address. If payment is accepted online, you will need to include the URL of the payment portal.
Landlords often offer special deals in order to encourage new tenants to sign longer-term leases or agree to increased rental payments. You should include the details regarding any such incentives agreed to by the parties. Common signing incentives include rent concessions (e.g. the first month free), waived fees, or similar non-standard benefits.
You may wish to add fees for past-due rental payments, dishonored payments (i.e. bounced checks due to insufficient funds), lost keys, and other items. Note that some fees may be limited by state law. LegalNature’s agreement has options to include standard language for many common fees protecting the landlord’s rights. You can also include your own custom language for any fees or deposits you require.
It is normally advised that landlords always collect a security deposit to protect against any damage to the property or delinquent payments. Keep in mind that a good lease agreement will still protect the landlord in the event that the money owed by the tenant exceeds the security deposit. The security deposit is meant to make it easier for landlords to recover their losses at the end of the tenancy and helps the parties avoid any costly litigation.
Most states impose strict requirements regarding how and when security deposits should be kept or refunded by the landlord. Landlords should review their state rules prior to leasing.
The security deposit is commonly used to repair damages that go beyond normal wear and tear to any part of the unit or common areas. In practice, this means that the landlord is responsible for repairing normal deterioration that occurs over time to the unit not caused by the tenant’s negligence.
LegalNature’s agreement provides the tenant with a list of requirements that must be met in order to have their security deposit returned at the end of the lease. These requirements include the following:
You can consider including an option to allow the tenant to leave in the middle of the lease term by presenting an acceptable substitute tenant to the landlord. This means that the substitute tenant will take over the current tenant’s legal obligations, releasing them from the agreement. The landlord is still free to reject a substitute tenant as long as there are reasonable grounds to do so. If the substitute tenant is accepted, the landlord can then create a new lease agreement.
Our agreement prohibits the tenant from subletting the unit to a new occupant without first obtaining the landlord’s prior written consent. Violating this requirement is cause for the landlord to evict the tenant.
Included with your agreement is a Move-In/Move-Out Inspection Checklist to help the landlord document the condition of the premises. We highly recommend completing this checklist at both move-in and move-out regardless of your state; however, the following states require you to complete a move-in checklist:
For all properties constructed prior to 1978 (i.e. pre-1978 property), federal law requires leases to include a "Disclosure of Information on Lead-Based Paint." LegalNature includes this disclosure for you, and all parties must sign it. Landlords must store the original signed copy for at least three years. Tenants in these properties must also receive the federally approved lead hazard information pamphlet "Protect Your Family From Lead in Your Home" or a similar pamphlet approved for use in your state by the Environmental Protection Agency.
Maryland requires rental properties built before 1978 to be registered with the state and pass an inspection before each new tenant takes occupancy. For more information, visit the Maryland Department of the Environment (MDE) website.
In Vermont, landlords are also required to post a notice asking tenants to notify the landlord if they discover any chipped or damaged paint. Landlords must also attend a certified training program for lead paint maintenance each year. You can view an example of this notice on page 62 of this Vermont Rental Guide.
Each state has specific disclosure requirements that must be met prior to signing the lease. For example, most states require landlords to disclose serious problems that impact the unit's habitability; housing code violations; mold or flood zone warnings; radon warnings; bed bug disclosures; carbon monoxide, asbestos, and other warnings; the presence of a methamphetamine laboratory or a flood at the unit prior to the tenant's occupancy; whether the property is located in a military zone; and local rent control rules. If you are ever in doubt, it is best to always disclose these and similar issues. You can find your local rules on your city or county website or by contacting the office of your mayor, city manager, county administrator, or a locally licensed attorney.
Note that lease agreements for mobile home tenants often have very specific state requirements. LegalNature’s agreement does not cover such leases, so be sure to research your state's specific laws on mobile homes to ensure your agreement complies.
Wisconsin landlords must make a separate disclosure of any nonstandard terms in the agreement. This disclosure must be titled "NONSTANDARD RENTAL PROVISIONS" (see Wis. Admin. Code ATCP 134.06).
To execute your agreement, have all parties sign and date it. All parties should also receive a copy for their records.
A residential lease creates an agreement between a property landlord and one or more tenants that allows the tenants to occupy a residential property in exchange for payment. The agreement specifies the rights and obligations of all parties involved. It normally terminates after a fixed term, such as six months or one year.
A residential lease agreement differs from a residential rental agreement in that it lasts for a fixed term. A rental agreement continues as a periodic tenancy (i.e. week to week or month to month) indefinitely until one of the parties provides notice that it wishes to terminate the agreement.
These days, a thorough and well-written residential lease agreement is essential for ensuring that the rights of both landlord and tenant are upheld. It provides valuable recourse to parties whose rights are infringed upon. This dramatically reduces the likelihood of disputes between the parties in the future and helps ensure all parties fulfill their end of the bargain.
If you search around the Internet, you will find leases and rental agreements that vary widely in terms of length, thoroughness, and format. Every state has different laws as to what must be included. However, more states agree that, at a minimum, the following items must be included:
Recommended Additional Items
Additionally, for these agreements to properly serve their function and protect the interests of all parties involved, it is also a good idea for them to include language regarding the following items:
While some people use the terms "lease agreement" and "rental agreement" interchangeably, technically a lease agreement is used to create a fixed-term tenancy (terminating on a set date; for example after one year), while a rental agreement creates a periodic tenancy (automatically renews until one of the parties decides to terminate it; for example a month-to-month tenancy).
When landlords lease or rent residential property there is an implied warranty of habitability. This means that they must provide a safe and habitable living space at all times. If landlords fail to provide this, tenants have the option of withholding all or part of their rental payment until the problem is fixed.
Note that certain elements must normally be present for tenants to legally make rent deductions. For this reason, it is advisable to consult a real estate attorney before making deductions. These elements include the following:
With commercial property, there is no warranty of habitability. Instead, the terms of the contract will be the primary controlling factor of when rent may be withheld, if at all. Still, courts in some states have said that an implied warranty of suitability and fitness for a particular purpose exists for commercial leases.
A fixed-term tenancy is simply a tenancy agreement that states that it will end upon a specific date in the future, usually about six months or a year from the start of the tenancy. A periodic tenancy has no set end day and usually continues from month to month until one of the parties chooses to terminate the tenancy.
This leads to another important distinction: fixed-term tenancies are created by lease agreements while periodic tenancies are created by rental agreements. Therefore, the title of your agreement will change depending on your choice.
Many states give fixed-term tenants different rights than periodic tenants. This most commonly impacts the tenant's rights upon terminating the agreement or being evicted. The proper procedure for cancelling a fixed-term or periodic tenancy depends on the terms of the agreement and state law.
In the context of property leasing, deposits are normally refundable, while fees are nonrefundable one-time payments. Tenants must be notified if they are being charged a "deposit" that is nonrefundable.
For instance, security deposits are meant to protect landlords against tenants not paying for any damage they cause. At the end of the tenancy, deductions may be made from the deposit as permitted by state law, and the remaining funds must be returned to the tenant.
Examples of common fees include upfront fees for pets, administration costs, application processing, and cleaning fees.
An assignment occurs when a tenant transfers its entire interest in a leased property for the remainder of the term of the lease to another party. A sublet occurs when the tenant transfers anything less than its entire interest.
When an assignment occurs, tenants are normally released from all responsibility for the lease. However, it is important to note whether the terms of an assignment actually give a full release from all responsibility. Sometimes the language will keep the original tenant on the hook if the new tenant fails to pay rent or otherwise fails to fulfill its obligations.
On the other hand, with a sublease the tenant remains ultimately responsible if the subtenant fails to uphold its responsibilities. This is because, technically, there is no agreement between a landlord and a subtenant. The landlord must seek recovery against the original tenant. Often, subleases are temporary in duration, with the subtenant moving out of the property before the term of the original tenant's lease agreement expires.
In most states, landlords may only enter a tenant's unit in an emergency or after providing sufficient notice, as defined by state statute or court opinions. Even after providing notice, state law often limits the reasons landlords may enter the property in order to protect tenants' privacy. Most commonly, landlords are required to provide at least 24 hours' notice, provide the reason for entry, and schedule the entry during normal business hours.
Under state law, landlords can normally enter the property for the following reasons:
This occurs when a landlord does not physically or legally evict a tenant, but causes a substantial interference with the tenant's occupancy, usually rendering the property uninhabitable. Often this is due to the landlord's neglect or interference with the tenant's use and enjoyment of the property.
Examples include failure to provide or repair necessities (i.e. heat, water, and utilities), failure to provide a reasonable means of entering and exiting the unit (i.e. changing locks or blocking an entrance), and refusing to clean up health or environmental hazards. Additionally, constructive eviction can occur if the landlord causes or fails to stop extreme, dangerous, or illegal nuisances—for example, excessive noise, smoke, or odor; dangerous safety threats; or permitting illegal drugs or weapons on the property.
Typically, three elements must be met:
Although they are not caused by landlords, natural disasters, such as earthquakes, flooding, and fires, may amount to constructive eviction if they render the unit uninhabitable and the landlord is unable to fix the damage in a reasonable time frame.
Begin by collecting basic information about the lease, including landlord and tenant addresses and contact information, when the lease will begin and end, and rent and security deposit amounts. Also determine at this point if any special work orders or repairs will be needed for the unit. It is often easier to use a rental application to collect information from your potential tenant.
We help you integrate the information you collected into an agreement adapted to your needs. As you complete our questionnaire, we inform you about your choices at each step and dynamically ask new questions based on your previous answers and the state involved.
You should always read your lease agreement thoroughly to ensure that you understand the terms and that it matches your needs prior to signing. Keep in mind that you can always make your own text edits after completing our questionnaire by downloading your document in .doc format and opening it in Microsoft Word or Google Documents. If you are satisfied with your agreement, you can simply download it as a PDF document and sign it.
Each party should receive a copy of the fully signed agreement. Store your copy in a secure location. We recommend that you store a digital copy as well.
Periodically review your lease agreement as situations arise with the tenant. This will help ensure that each party is meeting its responsibilities. In order to renew the lease agreement upon completion of the tenancy, simply use LegalNature to update the dates and any other terms you wish to add or change in your agreement. Then have the parties sign your new agreement.
A rental application will help you vet potential tenants and collect information that you will eventually need for the lease agreement. We highly recommend that landlords create an LLC in order to shield them from common risks faced by sole proprietors.