A lease agreement is a legally binding document between a landlord and a tenant that defines the terms and conditions of renting a property. While rental agreements often cover short-term rentals such as month-to-month arrangements, a lease agreement is typically used for longer rental periods of six months or more.
Lease agreements are common for both residential and commercial rentals. In many cases, there is also an option to renew a lease once the initial rental period ends.
The exact details of a lease agreement will vary depending on the property and the needs of both the landlord and the tenant which is why most landlords explore steps for creating a legally compliant lease. However, most leases will include essential information such as:
- A description of the property
- The duration of the lease
- The agreed rental price
- Consequences of non-payment
Leases are essential because they outline the responsibilities and expectations of both parties. In some locations, lease agreements are required by law, but even when they are not mandatory, they serve as an important safeguard. Having a written lease helps prevent disputes and protects both landlords and tenants from financial or legal problems.
Without a lease agreement, landlords risk losing rental income, becoming liable for tenant-related illegal activities, or facing expensive repairs from property damage. Whether you are renting a small residential unit or a commercial property, it is strongly advised to have a valid lease agreement in place. If you are unsure what makes a lease enforceable or what must legally be included, it is best to consult with a real estate attorney.
How to Write a Lease Agreement
Templates for lease agreements are widely available, but it is still important to understand how to draft one properly and what information must be included. Even if you create your own lease agreement, it is best practice to have it reviewed by an experienced legal professional before it is signed.
To write a lease agreement, follow these steps:
Step 1: Outline your lease agreement. Lease agreements should be well-organized, clear, and easy to understand. A useful way to achieve this is by creating an outline before writing. Each section should have a heading, and you may include subheadings as needed. Common sections to include are:
- Leased Property
- Term
- Rent
- Deposit
- Utilities
- Occupancy
- Tenant Rights and Responsibilities
- Landlord Rights and Responsibilities
- Lease Termination
- Governing Law
Headings should be bold or underlined to make them stand out and allow readers to quickly find the section they need. Looking at sample outlines can help generate more ideas for headings to include.
Step 2: Determine important provisions. Make a list of all the rules, conditions, and requirements that you want the lease to cover. Once you have listed these provisions, organize them under the appropriate headings so that they can be expanded into enforceable terms later.
Step 3: Construct your lease clauses. After identifying the provisions, turn them into detailed clauses that clearly explain the expectations and obligations of each party. These clauses need to be legally enforceable, so it may be beneficial to have them reviewed by a legal professional to ensure compliance.
Step 4: Consult local laws or a legal expert. Different states and regions have specific laws about what can or cannot be included in a lease agreement. Reviewing local laws or having a qualified attorney check your lease will ensure that it complies with legal requirements and can be upheld in court.
Step 5: Formatting and fine-tuning. A professional lease should include a proper title and a section for signatures. Review the entire document to make sure it has all necessary headings, provisions, and clauses, and that the format is consistent and professional.
What’s Typically Included in a Lease Agreement?
The exact details in a lease agreement will vary depending on the rental situation and the agreements made between landlord and tenant. However, there are certain key elements that most leases include:
Party information: The lease should list the names of all tenants who will reside on the property as well as the landlord’s information.
Property information: To avoid confusion, the leased property must be clearly described. This should include the address, a description of the property, and any areas that are included with the rental.
Term of the lease: This section specifies how long the lease will last, including start and end dates, the total duration, and how renewal will work. Renewal terms can be written within this section or listed under a separate heading.
Rent amount: This specifies how much rent the tenant must pay, the due date, and acceptable forms of payment. It should also state whether utilities are included or must be paid separately by the tenant.
Late fees and penalties: The lease should outline how late payments are handled. It may include a grace period, penalties for late rent, or fees for bounced checks.
Security deposit: This section describes how much the tenant must pay as a security deposit, the conditions for returning it, and what situations could result in deductions or forfeiture of the deposit. It should clearly define what qualifies as “damage” beyond normal wear and tear.
Tenant rights and responsibilities: This section covers tenant rights such as privacy, along with responsibilities like maintaining cleanliness, following health and safety laws, and avoiding unauthorized modifications.
Landlord rights and responsibilities: Landlords must also meet obligations such as maintaining the property, handling repairs, and complying with local laws. This section outlines those duties as well as the landlord’s rights.
Lease termination and remedies: This explains the circumstances under which either party may end the lease before the expiration date. It should include how termination works, required notice, and any penalties or fees involved. Situations such as failure to pay rent, property damage, or illegal activity should be addressed.
Governing law: Every lease should include a clause stating which jurisdiction’s laws apply. It may also state that if any part of the lease conflicts with the law, the law will override the lease without invalidating the entire agreement.
Types of Lease Agreements
Lease agreements can take many forms depending on whether the property is residential or commercial. Some of the most common types used for commercial properties include:
Net Lease: The tenant pays rent plus most property-related expenses such as taxes, insurance, and maintenance.
Double Net Lease: The tenant pays rent, taxes, and insurance, but the landlord remains responsible for maintenance costs.
Triple Net Lease: Also known as NNN leases, tenants cover rent, taxes, insurance, and maintenance expenses.
Absolute Triple Net Lease: Tenants are responsible for all expenses, including major repairs like roof or structural replacements, leaving the landlord with little to no responsibility.
Percentage Lease: Tenants pay a base rent plus a percentage of their business profits.
Fully Serviced Lease: Also called a gross lease, this type bundles all expenses such as utilities, insurance, and maintenance into the rent. It places most responsibility on the landlord and is generally used for short-term agreements.
Can I Write My Own Lease Agreement?
It is possible to draft your own lease agreement, but it carries risks. Lease agreements must contain certain legal elements to be enforceable, and if you omit key clauses, you may expose yourself to financial or legal issues.
If you do decide to create your own lease, it is strongly recommended to have a real estate attorney review it. A professional can ensure that the lease includes all necessary provisions and complies with applicable laws.
Getting Help with Lease Agreements
If you have questions about writing a lease agreement or are unsure whether your draft is legally enforceable, the safest option is to seek assistance from an experienced real estate attorney. Professional guidance ensures that your lease protects your interests, avoids common mistakes, and complies with local laws.
