What is a Lease Agreement?

Lease agreement with two pens waiting to get signed

So, what is a lease agreement? In the context of real estate, a lease agreement is a legally binding document between a landlord (lessor) and a tenant (lessee) that details the terms and conditions for renting property. While leases can also be oral agreements, a written lease agreement offers a level of clarity that an oral agreement can’t match.

Think about it: Referencing an oral agreement can be much more challenging than reviewing a written lease. Proper documentation ensures that both parties clearly understand their rights and responsibilities, which increases the chances of successful outcomes.

Now, let’s examine the most common components that landlords incorporate into their leases. Some of them are legally required, and others reflect specific landlord preferences. Either way, understanding these details eliminates misunderstandings.

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What is in a lease agreement?

A well-drafted lease agreement should include the following elements:

  1. Required disclosures: Landlords must provide tenants with disclosures at the time of lease signing, and these can vary by state. For example, the state might only require the federally mandated lead-paint disclosure if you live in Louisiana. Conversely, a state like California requires disclosures covering everything from water beds to methamphetamine contamination.
  2. Party identification: Leases should include the legal names and contact information of the landlord, tenant(s), and co-signers or guarantors (if applicable).
  3. Property description: Here, the lease describes the rented property, including the address, unit number (if applicable), and shared spaces like parking or laundry facilities.
  4. Lease term: The lease term defines the length of the lease, with start and end dates. Some leases are fixed-term (1 year), and others are periodic (month-to-month).
  5. Rent: We all know what rent is, but there is more to it than that. This section must include the rent amount, due date, and accepted payment methods. It should also include information regarding late fees and grace periods.
  6. Security deposit: Depending on your state, the security deposit section could be pretty straightforward. It might only need to include the amount held and conditions for its return. In some states, you may be required to list the bank’s location holding the deposit, the interest rate, and when you pay interest to the tenant.
  7. Maintenance and repairs: One of the most critical aspects of a lease agreement is who is responsible for property upkeep. The contract should outline who is responsible for lawn care, pest control, and appliance repairs. Notifying the tenant about how to submit a maintenance request is also critical to avoid property damage and habitability concerns.
  8. Utilities: The lease must clearly state which utilities are included in rent and which ones the tenant is directly responsible for. Some states require landlords to disclose how they calculate utility charges when utilities aren’t individually metered.
  9. Property Access: Within this section, the lease must describe the landlord’s right to enter the property to conduct repairs or inspections and the required notice to do so. Depending on the situation, no notice may be necessary, such as in an emergency.
  10. Restrictions: Depending on the landlord, the lease may include restrictions on pets, smoking, and/or subletting.
  11. Early termination clause: An early termination clause specifies the conditions by which landlords or tenants can terminate a lease. Some may only require notice, and others terminate when a landlord or tenant breaches the contract.

Lease Agreement Types

Landlords have many different options for lease agreements. We’ll break down the most common types below.

Fixed-term lease: As briefly described above, a fixed-term lease is typically 6 months or longer. These leases are great for landlords who want to avoid regularly filling vacancies.

Month-to-month lease: A month-to-month lease (or rental agreement) offers landlords greater flexibility. It enables them to raise rent more regularly (where allowed by law) and move on from tenants with proper notice. Just be aware that landlords must have just cause to terminate a month-to-month tenancy in some states.

Gross lease: Property owners typically use gross leases for commercial property. They stipulate that tenants pay a flat fee for rent, and the landlord is responsible for paying any operating expenses related to the property.

Ground lease: In a ground lease, a tenant leases the land while the landlord maintains ownership of any buildings or structures on the property. Like gross leases, ground leases are commonly used for commercial property but are not uncommon in mobile home parks.

Room rental agreement: Some landlords generate income by using a tactic called house hacking. In this situation, landlords create room rental agreements that stipulate which room of a house a tenant will occupy.

Sublease: A sublease occurs when a tenant (sublessor) rents their rented property to another occupant (subtenant). Although the subtenant lives there, the sublessor remains responsible to the landlord for the lease.

What is the difference between a lease and a rental agreement?

While they might appear similar at first glance, there is an essential distinction between lease and rental agreements.

Lease agreements: Landlords use these contracts for long-term rentals lasting from 6 months to a year or longer. They provide stability for landlords and tenants as the rent and terms are fixed for the duration of the agreement.

Rental agreements: Landlords and tenants who want flexible terms should consider rental agreements. These agreements typically last for a month at a time, and either party can terminate them with property notice. Again, some states require landlords to have a valid reason for terminating the agreement.

Breaking a Lease Agreement

As with most aspects of lease agreements and landlord-tenant laws, your location matters. That said, there are circumstances where either landlords or tenants can break a lease. Typically, landlords will break leases and pursue evictions for circumstances related to lease term violations, like a tenant failing to pay rent.

Tenants have their own reasons for breaking a lease as well, and they include:

  • Domestic violence or other crimes
  • Active military duty
  • Uninhabitable residence
  • Landlord harassment
  • Exercising the early termination clause

Again, your location matters; these conditions don’t apply to every state.

How TurboTenant Can Help

We hope you no longer wonder about the answer to the question, “What is a lease agreement?” Perhaps you’re ready to create your own lease and set clear expectations for your rental property.

TurboTenant can help you generate a legally compliant lease agreement in under 15 minutes. Whether you’re looking for a fixed-term, month-to-month, or room rental agreement, just fill in the blanks and generate yours today.

It’s easy: Sign up for a free TurboTenant account to get started.