10 things to look for in a residential or commercial lease

If you're about to sign a lease, don't let the legalese trip you up. Whether it's a residential lease for your home or apartment, or a commercial lease for your business, these 10 common lease concepts explain your responsibilities and tell you what your lease will cost. Read them carefully, and you'll know what you're getting into before you sign.

1. The parties and the property

Your lease will identify the landlord, the tenant, and the property, or “premises."

Make sure the names and property address are correct. If you are signing a commercial lease and you have a business entity such as a corporation or LLC, you want to name the business—rather than you personally—as the tenant. This helps protect you from liability if something goes wrong.

2. The length, or 'term,' of the lease

This is the amount of time you are legally allowed to occupy the property and legally obligated to pay rent. For residential leases, the term is often one year. Commercial leases typically have multiyear terms.

3. Lease extensions or 'holdovers'

Many residential leases say that, at the end of the original lease term, the lease converts to a month-to-month tenancy. This means you can continue to live at the property and pay rent, but either you or the landlord can end your tenancy on 30 days' notice.

A commercial lease is more likely to expire at the end of the term, though it may be renewed for an additional time period.

4. The rent

Your lease will say how much your rent is and when it is due. Make sure the amount is what you're expecting.

Also pay attention to any penalties for not paying on time. Many leases give you a short grace period and then impose a late fee.

5. Security deposit

Most leases require you to pay a security deposit that the landlord will hold and use to pay for any damages you cause. A typical security deposit is equal to one month's rent, and cannot be used to pay your final month's rent.

6. Utilities

A residential lease should say who is responsible for utilities, such as electricity, gas, water, and trash service. Commercial leases may use industry terms like “triple net" to describe landlord and tenant responsibilities.

A commercial realtor or real estate attorney can help you understand your responsibilities and the commercial lease terminology that's used in your area.

7. Pets

If you have pets, make sure your residential lease allows them. Also, look for any additional charges you'll have to pay because of your pets.

Some landlords charge a one-time, non-refundable pet deposit, while others charge a monthly pet fee.

8. Other tenant rights and responsibilities

Your lease may make you responsible for certain maintenance issues, like lawn care and snow removal. It may also establish rules for using the property, including cleanliness and your right to make alterations or renovations. It may place restrictions on who can live or work there, your ability to run a business out of your home, or the kind of business you can operate on commercial property.

Read all these restrictions carefully. If you have questions or issues, discuss them with your landlord before you sign the lease.

9. Subletting

Many leases prohibit you from subletting the property or assigning the lease without the landlord's permission. This means you can't rent the property to someone else or put it on Airbnb unless your landlord agrees.

10. Insurance

Typically, the landlord's insurance does not cover your furniture, business equipment, and other belongings. Your lease may require you to obtain insurance.

Any lease also will have a number of other clauses, many of which are routine and simply follow state law. It's never a bad idea to review your lease with an attorney before you sign it, especially if it's a commercial lease requiring a multiyear commitment.