What Is a Residential Rental Lease Agreement?
A residential lease agreement, also referred to as a rental lease agreement, is a contract between the landlord (lessor) and tenant (lessee) that sets forth the terms of the rental property, from an apartment to a residential property. The terms of the residential lease agreement include (but are not limited to!) rental location, dates of rental, monthly rent amount, payment methods accepted, deposit requirements, utilities you will provide and more.
For landlords, it’s also important to spell out what (if any) changes are allowed to the rental property in the lease agreement. It should also be noted exactly how either the landlord or tenant can terminate the lease — if the situation arises.
Additionally, the residential lease agreements will detail what the obligations of the landlord and tenant are, such as property maintenance. On some rare occasions, there may be an additional provision to the agreement that will include whether the tenant is responsible for any specific rental maintenance, such as plumbing.
Whether you own a single rental property or several, it’s important to develop processes for showing apartments and rentals, performing proper tenant screening or a tenant background check on applicants and extending leases.
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What is the difference between a lease agreement and a rental agreement?
Although the terms “lease agreement” and “rental agreement” can often be used interchangeably, there is a difference between the two. The main distinction is the length of time each agreement covers.
A lease agreement refers to a longer period of time — typically 12 months. Some residential lease agreements can also extend between 6- to 15-month agreements. Meanwhile, a rental agreement usually refers to a shorter period of time, averaging about 30 days.
What should be included in your lease agreement?
As a legal contract, it’s essential that your residential lease agreement contains every critical detail needed to ensure streamlined rentals. Below is the information you should cover for basic terms of the tenancy:
Tenant contact information
Every single adult that intends to live in your rental property must sign their name on the lease or rental agreement. This ensures that the landlords can hold each and every tenant accountable for all agreement terms legally. If your tenants regularly skip or miss payments, or violate any other important terms of the lease, you can then terminate their tenancy or begin eviction proceedings.
Responsibilities and obligations
A lease agreement covers your responsibilities as the landlord and the renters’ responsibilities for the lease term. The lease agreement begins with a description of the property address and basic personal information on tenants and the landlord or property management company. It also spells out tenants’ obligations to you, such as quiet hours or leaving the apartment move-in ready at the end of the lease.
The duration of the lease, terms for renewal and causes for termination are listed, too. The duration of the lease agreement is to be negotiated with the prospective tenant with common terms being 6 months to a year but can be for as short or long as you’d prefer. The terms for renewal must be written in the rental lease as well, and those can be for any period you choose (or not offered at all). A new rental lease agreement is not required for renewals if the terms, services or any law has not changed. The tenant can continue to reside in the rental property based on the original lease.
Payment of rent
The rental lease agreement form outlines the day rent is due and how payments are to be made. It is your decision what forms of payment you will allow and the date you want the rent to be paid. Payment options may include cash, check, money order or cashier’s check. You also might want to consider offering access to pay online via direct deposit to your account or by credit card (which may or may not incur additional fees).
The lease or rental agreement also needs to indicate any penalties if the rent payment is late. Even if rent is one or two days late you should utilize a late rent notice. A written notice will help to keep track of delinquencies and to remind the tenant they need to be responsible for unpaid rent. If your tenant is allowed to have pets, you should also note whether there is an additional monthly pet charge.
Each lease agreement should outline exactly when the terms of the security deposit will be. This includes the full amount of the security deposit and what the landlord can do with the deposit (e.g. for damages, repairs or cleaning). For additional clarity, ensure that you include when and how you will return the security deposit after their lease ends.
For legal purposes, be sure to comply with state or local law that sets maximum security deposit amounts. You may also be legally required in some states and cities to add to the lease agreement where the security deposit is being held and whether there is additional interest that will later be paid to the tenant.
Repairs and maintenance
For the sake of your rental property’s overall security and maintenance, include a requirement that if there are any broken or dangerous conditions in the rental unit, the tenant must inform you in a timely manner. To streamline the process, add in exactly how the tenant should notify you and if there are specific procedures to follow. Similarly, it should be clear that the tenant is responsible for maintaining the cleanliness of your rental property and paying for any damages they caused.
Potential future rent increases
For lease agreements that may be renewed, you’ll want to include conditions for rent increases. Write out exactly when and how a tenant may expect a rent increase — and the proposed percentage it will rise. For shorter rental agreements, you probably won’t need to add too many details about rent increases.
The lease lets renters know where and how to report problems with maintenance in the rental unit, what specific behaviors are prohibited (such as smoking) and usually spells out which utilities (if any) are covered by the landlord and which renters must cover themselves.
While you can customize your rental lease agreement with additional clauses (e.g., specifying which and how many, if any, pets are allowed in apartments), your lease must always conform to state laws. Check-in with any rent control ordinances, occupancy rules, anti-discrimination laws and health and safety codes that may affect your property. Including a clause that violates state law could nullify the document, which is not something any landlord wants!
For this reason, it is crucial that any lease agreement you use — whether it’s a 12-month lease or a residential rental agreement that’s month to month — be vetted by professionals for legal accuracy and completeness.
Other common lease terms include subletting clauses, provisions for property damage or the security deposit, and landlord or tenant improvements.