Lease Agreement

A lease agreement is a legally binding contract between a landlord and a tenant. It grants the tenant the right to occupy and use the property in exchange for rent. It also establishes the terms, rights, and obligations of both parties.

The length of a typical lease agreement largely depends on whether you are dealing with a commercial or residential lease. While many lease agreements cover a period of 12 months, it’s not uncommon for commercial leases to last 5 to 10 years. Residential lease agreements, on the other hand, could last one year, as is typical with the renting of residential property, but they could also last for several years if the tenant and landlord agree on an extended rental period.

How a lease agreement works

A lease agreement takes effect when both parties sign the document, at which point it becomes an enforceable contract governed by the laws of the state where the property is located.

A lease may create a fixed-term or periodic tenancy. During a fixed-term lease, neither party can generally change the core terms without the other party’s agreement, unless the lease or applicable law allows the change.

At the end of a fixed term, the tenancy may expire, renew, or convert to a periodic tenancy. The result depends on the lease, the parties’ actions, and applicable law. For example, accepting rent after a fixed-term lease ends may create a month-to-month tenancy in some circumstances.

Key characteristics of a lease agreement

A well-drafted lease agreement typically includes:

1. Parties: The legal names of the landlord and tenants
2. Property description: The address and unit or space covered by the lease
3. Lease term: The start date, end date, or periodic rental term
4. Rent: The rent amount, due date, payment method, and any permitted late fees
5. Security deposit: The deposit amount, permitted uses, and conditions for its return
6. Maintenance responsibilities: The repairs and upkeep each party must handle
7. Rules and restrictions: Policies on pets, smoking, subletting, and alterations
8. Termination: Notice requirements, early termination terms, and remedies for breach
9. Required disclosures: Federal, state, or local notices that apply to the property. For example, state law often mandates specific disclosures, such as lead paint notices or habitability standards, that must be included for the agreement to be legally valid.

Lease agreement vs. rental agreement

While both a lease agreement and rental agreement outline the terms of a property rental, rental agreements are more commonly used for short-term rentals, including month-to-month leases, while lease agreements are used for longer-term rental agreements—usually lasting one year or more.

The decision to use a lease or rental agreement is largely up to the property owner and how comfortable they feel in leasing out their property for longer periods of time.

Considerations and best practices

Lease agreements fall under state law, and requirements vary significantly by jurisdiction. A clause enforceable in one state may be void in another.

Verbal lease agreements can be legally valid for short-term rentals in some states, but they are difficult to enforce. A written agreement is always the more defensible option.

Any modifications after signing require mutual consent and should be documented as a written addendum signed by both parties; informal changes are difficult to enforce.

Related terms

The following terms commonly appear in lease arrangements:

1. Landlord: A person or entity that rents or leases property to a tenant
2. Tenant: A person or entity entitled to occupy property under a lease or rental agreement
3. Security deposit: Money held by a landlord for costs permitted under applicable law
4. Legal notice: A written communication required before certain actions, such as terminating a tenancy or addressing a lease violation.

FAQs about lease agreement

Can a landlord write their own lease agreement without an attorney?

Yes. No law requires attorney involvement for a residential lease to be valid, but the agreement must still comply with state-specific statutes, including required disclosures and deposit limits. Landlords managing complex arrangements or properties in multiple states should have an attorney review the document before signing.

What happens when a lease expires and neither party takes action?

The result depends on the lease and applicable law. The tenancy may end, renew automatically, or become periodic. In some jurisdictions, a landlord who accepts rent after the lease expires may create a month-to-month tenancy.

What makes a lease agreement legally unenforceable?

A lease can become unenforceable if it contains clauses that violate state law, such as waiving a tenant’s implied warranty of habitability, exceeding statutory deposit limits, or omitting required disclosures. Courts typically strike the offending clause rather than void the entire agreement, but a fundamentally defective lease may leave a landlord without the remedies they expected.

Does a lease agreement need to be notarized?

For standard residential leases, notarization is not required in most states. Some states require it for commercial leases or leases exceeding a certain term length. Landlords should confirm requirements in their jurisdiction before finalizing the document.