Residential Lease Agreement FAQ - United States


Frequently Asked Residential Lease QuestionsThe Parties in a Residential LeaseThe Property in a Residential LeaseResidential Lease Term InformationOption to Purchase in a Residential LeaseNotice Periods in a Residential Lease AgreementDeposits in a Residential LeaseAdditional Questions About a Residential Lease
Frequently Asked Residential Lease Questions
What does Governing Law mean?

Governing Law refers to which jurisdiction’s laws will apply to the legal contract or document.

In a Residential Lease, the governing law is based on where the property is located, not where any of the parties are located. For example, if you live in Texas, but are renting out property in California, the governing law for your lease agreement would be that of California.

What is the difference between a Residential Lease and a Commercial Lease?

A Residential Lease is a lease for residential property (property that you would live in), like a townhouse, single-family home, condo, or apartment.

A Commercial Lease is for commercial property (business property), like an office building, strip mall, or factory.

Is a verbal lease agreement binding?

A verbal or oral lease agreement is very difficult to enforce. If a dispute were to arise between the landlord and tenant, a court would have to hear evidence from both parties and choose which version of the agreement to accept.

In a written Residential Lease Agreement, courts are generally obligated to uphold the terms of the document, unless the terms are unlawful or invalid.

What is included in a Residential Lease?

A Residential Lease typically includes the following information:

  • the type of property being rented (house, room, basement, townhouse, condo, duplex, mobile home etc.);
  • the address of the property being rented;
  • how long the lease term is and whether it will renew automatically or not;
  • how much the rent will be and when it is due; and
  • the provisions of any security/damage deposit.

In addition, a residential lease may also identify the following:

  • taxes that are payable by the tenant;
  • landlord improvements and signing incentives;
  • tenant improvements and signing incentives;
  • landlord and tenant repair obligations;
  • who will pay for what utilities;
  • whether the tenant can assign or sublet the property;
  • notice provisions for termination of the tenancy; and
  • insurance provisions.
The Parties in a Residential Lease
Who are the parties in a Residential Lease Agreement?

The parties in a Residential Lease include the landlord or lessor and the tenant or lessee.

The landlord is the person who owns or manages the rental property, and the tenant is the person who lives in the property in exchange for regular rent payments.

What is a guarantor or surety?

If a tenant is unable to pay their rent or if they breach their Lease Agreement, a guarantor or surety is a person who agrees to pay any losses to the landlord.

For example, if you have a lease, and your father is the guarantor, he would be responsible for making a rental payment to the landlord if you weren’t able to.

What if I don't have all of the contact information?

If you don’t know the name or contact information of someone who will be in the lease, a blank space will be provided in your document that you can fill in at a later date. However, it is best to make your contract as complete as possible before you print and sign it.

What are the landlord's obligations in a Residential Lease Agreement?

The landlord's obligations are defined by the terms and conditions contained in the lease and the laws specific to where the property is located.

The most important obligations of the landlord include providing the tenant access to the property, obligations to repair and maintain the structure of the property, and allowing the tenant “quiet enjoyment” of the property. Generally, this means that the tenant can live in the property and will not be unreasonably disturbed.

What are the tenant's obligations in a Residential Lease Agreement?

The tenant's obligations are defined by the lease and the laws specific to where the property is located. The most important obligations of the tenant are to pay rent on time and not to cause damage to the property.

What happens if a tenant breaches a term of the lease?

If you breach a term of the lease, you are responsible for correcting it.

If you are the tenant, this may involve paying money to fix any problems or damages that you or your guests may have caused.

If you do not voluntarily pay to correct the breach, such as making a repair or payment, you can be sued for damages sustained as a result of the breach and/or possibly be evicted by the landlord.

The Property in a Residential Lease
Who can live in the premises or property under a Residential Lease?

Only tenants and people listed as occupants may reside in the rental property, and the landlord must be informed and approve of any change to the list of permitted tenants.

Children born or adopted while the tenant lives in the premises are automatically added to the lease as occupants.

Keep in mind that any jurisdiction may restrict the number of tenants/occupants in the premises if that number violates health or safety standards for housing. These standards vary from jurisdiction to jurisdiction so if you are concerned, check with your local housing/public health authority.

What is a residential basement suite?

Typically, renting a basement suite is similar to renting a room in that the tenant is sharing an accommodation with the landlord.

A basement suite is usually a self-contained unit complete with its own kitchen, bathroom, and living area. Most tenants of a basement suite use a separate entrance to enter the house than the rest of the occupants.

What are body corporate bylaws?

A body corporate refers to a group of owners whose lots or units share common property. For example, in a condo complex, the condo units share the same common property (the building), but may be owned by different real estate investors.

The body corporate bylaws means the set of rules that govern the internal management of the units. For example, though there may be different lot owners, all of the residents in the building may need to follow specific rules relating to noise, parking, pets, garbage disposal, and the use of common property, regardless of who they make their rent payments to.

These bylaws are sometimes referred to as a Community Management Statement, Homeowners’ Association (HOA) rules, or Condominium Bylaws.

Residential Lease Term Information
Should I use a fixed or periodic Residential Lease?

Which type of lease term you decide to use depends on your personal situation and preferences. The three most common lease terms are as follows:

Fixed End Date Term Lease

A lease with a fixed end date specifies the exact day the tenancy will end. For example, if you have a lease with a fixed end date of May 31st, 2021, the lease would simply end on that day. Neither party would need to give notice to the other to terminate the lease.

During a fixed term lease the landlord cannot increase the rent or change any other terms of the lease unless he or she specifically reserves that right in the agreement or the tenant agrees to the changes.

Fixed Number of Weeks/Months/Years Term Lease

A lease for a fixed number of weeks, months, or years gives a start date for the lease and the number of weeks, months, or years that the lease will run.

For example, the lease could start on May 31st, 2017 and then continue for a set number of weeks, months, or years.

The start date and time period (for example, 12 weeks, 6 months, or 1 year) is determined by the landlord and tenant, and the lease is terminated at the end of the specified period of weeks, months, or years.

Periodic Term Lease

A weekly, monthly, or yearly lease with automatic renewal (a periodic tenancy) will continue so long as neither party wishes to terminate the lease.

In a periodic term, the landlord may not change the terms of the lease during the lease period. If you agreed to rent the property for 12 months, the lease wouldn’t automatically end once the year was up unless either the tenant or landlord gave notice to terminate the lease.

Instead, the lease would periodically renew based on the time period agreed between the landlord and tenant at the beginning of the lease. Sometimes, the landlord will change the rent or other terms of the lease during the periodic renewal. In this case, the tenant would have two options: accept the terms and continue to live in the property, or give the required notice to terminate the lease.

What happens if a tenant tries to end a fixed term tenancy?

Typically, when a tenant agrees to a fixed term tenancy, they are agreeing to be responsible for the rent during that period of time.

If the tenant vacates the premises prior to the end of the term of the agreement, they will generally remain responsible for rent payments for the entire length of the lease (provided the tenancy is not in a jurisdiction that allows the tenant to give notice to prematurely end a fixed term tenancy).

If the landlord is able to re-rent the premises prior to the end of the lease of the breaching tenant, the breaching tenant might not be required to pay rent, as the landlord cannot collect double rent payments for the property.

In addition, some leases may contain clauses whereby the tenant is required to pay "re-rental fees" to cover part of the cost of the landlord having to re-rent the premises. However, the amount of the "re-rental fee" has to be reasonable and must be an estimate of the damages that the landlord will suffer if they have to re-rent the premises early.

What happens when a Residential Lease ends?

When a lease ends, it doesn’t necessarily mean that the rental agreement has been terminated.

Ending a Periodic Term Lease

If you choose to go with a periodic term lease, the lease will automatically renew with the same terms as the initial lease, unless changes are made by the landlord using the required notice period. Even after the initial lease period, notice from either the tenant or the landlord is required to end the lease agreement.

Ending a Fixed Term Lease

If you choose a fixed term lease, the rental relationship between the landlord and tenant may continue if both parties agree. In some jurisdictions, a fixed lease automatically becomes a periodic term lease (usually month-to-month).

In other jurisdictions, the fixed term lease may become a “tenancy at will” or a “tenancy at sufferance” when it ends, which only lasts as long as both parties want it to. This type of lease term typically occurs after an expired lease and does not receive as much legal protection as an unexpired lease.

If you wish to terminate all rights under a fixed term lease as soon as it expires, it is prudent to serve notice before the end of the lease term, in accordance with your local requirements.

Option to Purchase in a Residential Lease
What is an Option to Purchase?

An option to purchase refers to a clause in a Residential Lease Agreement that allows a tenant to buy the rental property from the landlord at the end of the lease term.

Generally with an option to purchase, the tenant will pay the landlord a non-refundable option fee at the beginning of the lease term, which gives them the exclusive right to purchase the property from the landlord when the lease term expires.

The tenant has a limited time to exercise their option to purchase, and if they choose to buy the home, the option deposit that they paid at the beginning of the lease is used towards the purchase price of the property.

If the tenant chooses not to purchase the home, the landlord will get to keep the option fee and neither party will have any rights or claims against each other concerning the option.

What are the advantages of having a lease with an option to purchase?

From the tenant's perspective, the advantage of this kind of lease is that they don't have to pay the purchase price up front.

If the tenant cannot qualify for a mortgage or a loan, they have the option of purchasing the property at a later date when their finances are more secure. In addition, the purchase price may be fixed, so the tenant doesn’t need to worry about any market fluctuations that may increase the price of the home.

From the landlord's perspective, the advantages of this type of lease are that they may be able to sell their property in a slow market, and they can charge a higher rental amount than they could using a regular lease.

If the tenant/buyer does not exercise the option, the landlord gets to keep the option fee.

What are the disadvantages of having a lease with an option to purchase?

From a landlord’s perspective, one of the disadvantages of having a rent to own agreement with a tenant is that they will not receive an immediate cash sale on the property, and there is no guarantee that the tenant will purchase the home at the end of the term.

There is also the possibility that if the real estate market begins to strengthen after the agreement is made, the landlord may not receive the appreciated value of the property if they determined a purchase price when negotiating the option to purchase with the tenant.

From a tenant's perspective, the main disadvantage of an option to purchase is that they will lose their option fee if they decide not to purchase the home, either because they no longer wish to live there or because they are not able to obtain financing.

Notice Periods in a Residential Lease Agreement
How much notice do I need to give to end my Residential Lease?

In most jurisdictions, landlords and tenants are required by law to give a certain amount of notice to end a lease.

A rental contract can specify a longer notice period than the legal minimum, but it cannot specify a shorter period.

If you are unsure about the minimum amount of notice you must provide, review the residential leasing laws in your jurisdiction.

What does “notice to enter” mean?

Generally, a landlord does not have the right to enter a rental property without notifying the tenant beforehand, unless there is an emergency like a fire or gas leak.

As long as a landlord provides proper notice to a tenant before entering the rental property, the tenant cannot refuse to allow them to enter the premises.

What if I don’t want to renew my Residential Lease agreement?

If you are a tenant and you don’t want to renew your lease agreement, you must provide proper notice to your landlord stating that you don’t intend to renew the lease when it expires.

The required notice period will vary depending on where you are located, so you should consult your jurisdiction’s tenancy laws if you are unsure of how much notice you are required to give.

Deposits in a Residential Lease
What is a security or damage deposit?

A security deposit (also known as a damage deposit) is a sum of money the tenant pays to the landlord to guarantee that the tenant will fulfill all of their obligations under the lease, like ensuring that the property is clean and undamaged and that they pay their rent on time.

The tenant usually pays the damage deposit at the beginning of the lease and the landlord holds it in trust for the term of the lease to ensure that the tenant does not default on the terms.

If the tenant does damage the property beyond normal wear and tear, or if the tenant fails to make a rent payment, the landlord is entitled to use part or all of the security deposit to cover any losses.

At the end of the lease term, the landlord will give the damage/security deposit back to the tenant, minus any deductions for damages or unpaid rent.

Note: In some jurisdictions, a landlord is not allowed to ask for a security deposit. In other jurisdictions, a landlord may require multiple types of deposits (for example, both a damage deposit and a pet deposit). You should review the governing legislation for the location of the property to make sure the type of deposit is allowable.

How much can my landlord charge for a security deposit?

How much your landlord can charge for a security deposit depends on where you are located. The statutory amount that can be charged is typically anywhere from half a month’s rent to two months’ rent depending on the jurisdiction.

The most common amount for a security deposit is one month’s rent.

When can my landlord keep part of my security deposit?

The landlord can deduct amounts from the security deposit at the end of a tenancy when the tenant owes money for either unpaid rent or damages to the property.

Generally, a landlord cannot deduct money from the deposit for general wear and tear.

They can deduct money from the deposit for things like carpet stains, large holes in walls, missing appliances, and other major damages.

What is an Inspection Report?

Before a tenant moves into a rental property, the landlord should walk them through the premises to make a record of any existing damages. This written account of damages is called an Inspection Report, and both the tenant and landlord should retain a copy after the initial walkthrough.

In some jurisdictions, an Inspection Report is also required when a tenant moves out, as a condition for the landlord to make a claim against the tenant’s security deposit.

Why do I need an Inspection Report?

An Inspection Report helps to document what (if any) damage was caused by the tenant during the time that they lived in the property, so that the landlord is able to determine what amount to deduct from the security deposit to make any repairs.

Additional Questions About a Residential Lease
What is an assignment and how is it different from a sublease?

Assignments and subleases both occur when the tenant gives his/her rights under the lease to a third party. A sublease or an assignment typically requires the consent of the landlord.

An assignment occurs when the tenant gives all of their rights under a lease to a third party for the remaining term of the lease. If a tenant assigns the rental property and the landlord consents to the assignment, that tenant no longer has any rights to the property.

In a sublease the tenant can transfer a portion of the leased space (e.g. a room in a house) or a portion of the tenancy (e.g. 5 of the remaining 6 months of the lease) to a third party. The original tenant retains their rights under the lease, as well as his or her obligations under the lease, but gains new rights and obligations with the subtenant. Typically, the original tenant can still sue and be sued by the landlord for lease violations of the subtenant, and it will be left to the original tenant to then pursue the subtenant.

What is a signing incentive?

A signing incentive in a Residential Lease Agreement is a bonus that a landlord gives to a tenant, generally for signing a lease. It can include things like a free month’s rent, a reduced security deposit, or cheaper rent for the duration of the fixed term tenancy.

If the tenant breaches any terms in the lease, these incentives may have to be paid back to the landlord.

Why do renters need insurance?

While a landlord most likely has insurance, it usually only covers the landlord’s assets and liabilities.

Tenant’s insurance covers the tenant’s personal belongings, and may cover other risks, such as liability or alternative living expenses.

What is meant by the "Act"?

The "Act" refers to the legislation that governs residential tenancy agreements in your jurisdiction.

What is a rerent levy?

When a tenant breaks the lease conditions and has vacated the property before the lease expires, the landlord may charge a rerent levy to recover the loss of rental income and any costs associated with having to find a new tenant.

A rerent levy is generally only charged when the term of the lease is six months or longer, and is only allowed in some jurisdictions.

The amount charged must be reasonable given the circumstances, and must not exceed the losses that the landlord incurs from the tenant leaving early.

What does "other charges will be treated as rental arrears" mean?

Some rental contracts contain payments other than rental payments. For example, the tenant may be required to pay utility bills, NSF charges, or late fees.

If these charges are not paid by the tenant, the landlord may treat these unpaid amounts as non-payments of rent and start eviction proceedings against the tenant.

Without the clause stating that “other charges will be treated as rental arrears”, the landlord could not treat a failure to pay these bills as a non-payment of rent and could not start an eviction process as quickly (or at all, in some cases).

What happens if I sign a lease but cannot move in or take possession of the property?

When you sign a lease, you are promising under contract that you will pay rent to the landlord. This is a legal obligation that courts take seriously.

If you cannot move in or take possession of the property after signing your Residential Lease Agreement, you may be liable to the landlord for loss of revenue resulting from you not paying the rent, even if you have a good reason for not being able to take possession.

Be sure to inform your landlord of the situation immediately, so that they cannot claim that they suffered losses as a result of not being aware that you weren’t moving in as agreed upon.

Because this is a complicated situation, you may wish to contact a qualified lawyer in your jurisdiction, especially if large sums of money are involved.

You may also wish to contact your local Residential Tenancies Board or government agency who oversees landlord/tenant disputes to find out the extent of your liability, which may or may not be limited by statute.

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