How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.
Lease agreement: How-to guide
Whether you're a landlord looking to protect your property or a tenant ensuring a safe and fair renting experience, having a comprehensive lease agreement is essential. It is the foundation of a secure rental relationship, setting expectations, defining rights, and protecting all parties involved. For landlords, it safeguards their investment. For tenants, it ensures they have a comfortable and predictable living situation.
In this guide, we’ll walk you through everything you need to know about lease agreements, or what people loosely refer to as 'rental agreements'—from their importance and types to tips for creating one that meets your needs. Let’s dive in.
What is a lease agreement?
A lease agreement is one of the most critical documents for landlords and tenants when renting a property. Simply put, it is a contract between the lessor (landlord) and the lessee (tenant). It outlines the terms and conditions under which the landlord allows the tenant to occupy and use the property in exchange for monthly rent payments.
Who needs a lease agreement?
Lease agreements are essential for anyone involved in property rental. Whether you’re a landlord renting out your home, a commercial property owner leasing office space, or a tenant looking for protection, having a well-drafted lease agreement is essential.
It clarifies rent payments, the lease termination date, security deposits, and property use, preventing unnecessary disputes.
The difference between a lease agreement and a rental agreement
Although the terms “lease agreement,” “rental agreement,” or “rental lease agreement” are often used interchangeably, they are different. Here’s how:
| Points of differences | Lease agreement | Rental agreement |
|---|---|---|
| Term | Remains fixed; long term | Month-to-month basis; short term |
| Benefit | Provides stability | Provides flexibility |
| Rent amount | Remain unchanged through the term | Can be adjusted frequently with a reasonable notice period |
Common types of lease agreements
Depending on the property type and the needs of the landlord or tenant, there are several types of lease agreements:
1. Residential lease agreement
The residential lease agreement is used when leasing homes, apartments, or condos. It outlines details like the rent amount, security deposits, rules about personal property, and lease terms.
2. Commercial lease agreement
Designed for leasing office spaces, retail stores, or industrial properties, a commercial lease agreement is more complex than a residential lease. It often includes clauses about property use, tenant responsibilities for maintenance, and lease termination dates.
3. Month-to-month lease agreement
This flexible arrangement works for situations where the tenant or landlord needs short-term commitments. It renews every month, seeks a monthly rent payment, and allows either party to terminate with reasonable notice, as outlined in local state lease agreements.
4. Fixed-term lease agreement
This document specifies a set duration, such as six months or a year. It provides stability for both parties and often includes penalties for breaking the lease early unless otherwise stated in the agreement.
5. Percentage lease agreement
A percentage lease agreement is a type of commercial lease where the tenant pays a base rent plus a percentage of their sales revenue. This is common in retail spaces like shopping malls, where landlords benefit when businesses do well.
6. Rent-to-own lease agreement
This type of agreement allows tenants to rent with the option to buy the property later. It’s ideal for those aiming to transition from renting to ownership.
7. Gross, net, and modified leases
- Gross lease: Tenant pays a flat rate, with the landlord covering operating expenses.
- Net lease: Tenant pays rent plus expenses like property taxes or utilities.
- Modified lease: A hybrid where responsibilities are shared between landlord and tenant.
Key components to include in your lease agreement
ARTICLES SOURCES
States and official source of regulations
Common legal considerations
Understanding key legal requirements can help both landlords and tenants avoid misunderstandings and stay compliant with laws.
1. Security deposit laws: Each state has limits on how much a landlord can charge as a security deposit and how long they can hold it after the tenant vacates.
Example: In South Carolina, landlords must return security deposits within 30 days of lease termination1 if the lease is by the month.
2. Notice periods for termination: Reasonable notice periods vary by state. It is important to be aware of and act in accordance with state laws to avoid unnecessary conflicts and penalties.
3. Rules for prorated rent and grace periods: Landlords often prorate rent if tenants move in mid-month. Additionally, states like Michigan may mandate grace periods to accommodate delayed payments.
Example: A tenant moving into a leased property on the 15th of the month may only pay for the remaining days instead of the full month.
4. Late fees and penalties: While landlords can impose late fees for overdue rent, these must be reasonable and align with state regulations.
Responsibilities of the lessor and lessee
A successful landlord-tenant relationship depends on understanding and fulfilling responsibilities on both sides. Clear communication, a solid rental agreement, and adherence to state-specific laws are essential. Here’s a closer look at the duties of both the lessor (landlord) and lessee (tenant), along with actionable tips to navigate this relationship smoothly.
Responsibilities of the lessor
1. Providing a habitable property: Landlords are required to ensure that the rental unit is safe and meets all local housing codes2. This includes functioning utilities, proper heating or cooling, and secure structural elements.
Example: A landlord renting an apartment in Rhode Island must comply with state statutes, ensuring working smoke detectors and pest-free living conditions.
2. Maintaining the property: Repairs and routine maintenance are part of the landlord’s responsibilities unless otherwise stated in the lease agreement.
Example: If a tenant reports a broken water heater, the landlord is obligated to repair it within a reasonable time frame.
3. Respecting tenant privacy: As mentioned by your state laws, landlords can’t enter the rental unit without proper notice3, which is typically 24–48 hours.
4. Handling the security deposit properly: State laws govern how landlords manage4 security deposits. For instance, Missouri limits the deposit to two months’ rent and requires its return within 30 days5 of lease termination.
Responsibilities of the lessee
1. Paying rent on time: The tenant’s primary duty is to pay rent according to the lease agreement, including adhering to due dates, grace periods, and late fee terms.
2. Taking care of the property: Tenants must keep the rental property clean and notify the landlord of any damage or needed repairs.
3. Complying with lease terms: Tenants must follow the rules outlined in the lease, including pet policies, noise limits, and the use of amenities.
4. Providing proper notice for lease termination: State laws require tenants to give reasonable notice before ending a lease. For example, in Michigan, this is typically a 30-day notice for month-to-month agreements.
Lessor and lessee checklist: What to know before signing
For lessors (landlords)
- Screen tenants carefully: Use tenants' credit reports and thorough rental applications to ensure reliability.
- Understand state-specific laws: To avoid legal issues, familiarize yourself with your state's statutes.
- Document everything: Keep records of communications, maintenance requests, and rent payments for clarity and accountability.
For lessees (tenants)
- Read the lease thoroughly: Ensure you understand all terms, from lease termination dates to rules about the security deposit.
- Know your rights: To avoid disputes, be aware of local statutes because they outline your responsibilities as a tenant, set rules for rent payments and security deposits, and protect you from unfair practices.
- Communicate promptly: Inform your landlord about repairs or changes, such as needing to prorate rent when moving in mid-month.
Why use a LegalZoom lease agreement template?
Creating a lease agreement with LegalZoom is quick and hassle-free. Here’s how it works:
- Customize your lease: Use LegalZoom’s rich editor to fill in key details like rent amount, lease term, and security deposit. Adjust clauses to fit your rental property.
- Download instantly: Once complete, get your printable lease agreement template in a ready-to-use PDF format.
- Sign online: Use the eSignature feature to finalize the agreement without printing or mailing.
LegalZoom’s lease agreement templates save you time and effort, making renting simple for both landlords and tenants.
Frequently asked questions
Can a lease agreement be changed?
Yes, but changes require mutual consent from both the landlord and tenant. Updates should be documented in writing and signed by all parties.
Can I terminate a lease early?
Early termination is possible but may involve penalties, such as forfeiting the security deposit or paying additional rent, depending on the lease terms and state laws.
What happens if a tenant fails to pay rent?
Non-payment can lead to late fees, eviction notices6 or legal action. Grace periods may allow tenants extra time before penalties are enforced.
Sources
- Landlord and Tenant Law in South Carolina: https://www.scjustice.org/brochure/landlord-tenant-law-south-carolina/
- Healthy Housing Codes: https://nchh.org/information-and-evidence/healthy-housing-policy/state-and-local/healthy-housing-codes/
- Landlord Entering Your Unit: https://dcba.lacounty.gov/portfolio/landlord-entering-your-unit/
- Security deposits and last month's rent: https://www.mass.gov/info-details/security-deposits-and-last-months-rent
- Landlord Tenant Law: https://ago.mo.gov/get-help/programs-services-from-a-z/landlord-tenant-law/
- Failure to Pay Rent: https://www.peoples-law.org/failure-pay-rent
Lease Agreement Template
Related categories
Related templates
Assignment of Commercial Lease
Transfer your commercial lease to a new tenant smoothly. Create an assignment of a commercial lease to clearly articulate the new tenant's rights, responsibilities, and obligations.
Assignment of Residential Lease
Simplify lease transfers with an assignment of residential lease agreement. With the landlord's approval, smoothly transfer your lease responsibilities to a new tenant while documenting the arrangement comprehensively.
Equipment Lease Agreement
Define equipment leasing terms and usage guidelines with an equipment lease agreement. Ensure the owner and renter know of their roles and responsibilities.
Landlord Consent to Sublease
Obtain approval from the landlord to sublet a space with a sublease agreement. Use our template to clearly lay out the lease terms, obligations of the new tenant, payment, and other essential details.
Property Management Agreement
Ensure your property is well-maintained and in good hands with a property management agreement. Delegate the responsibilities to a property manager, such as negotiating lease terms with the renter, collecting rent, and addressing any repairs/maintenance.