Rental and Lease Agreements

People often mix up rental agreements and lease agreements. But while these terms both relate to real estate leases, they are not synonymous. Most rental agreements cover short-term tenancies, while lease agreements cover longer tenancies. One commonality between both terms is that they are rental contracts that govern the entire rental relationship.

This FindLaw article provides an overview of rental and lease agreements.

Rental Agreements vs. Lease Agreements

Many rental agreements cover short-term tenancies, such as month-to-month ones. In a month-to-month tenancy, the tenancy renews roughly every 30 days.

Lease agreements, by contrast, cover longer tenancies, often starting at one year. Lease agreements break down into two categories:

• Residential leases
• Commercial leases

Residential leases, as the name implies, cover residential housing. Commercial leases cover commercial real estate and commercial spaces. The type of lease offered will depend on the type of property available for rent. This also applies to the terms of the lease. The terms offered will depend on the type of lease offered.

Lease Provisions

Rental and lease agreements have a few things in common regarding lease provisions. Although many courts will uphold the validity of an oral agreement, written agreements offer more protection. Strong lease agreements serve as a road map to resolving potential problems. For example, your lease agreement should guide you on escalating a maintenance issue.

Residential and Commercial Lease Provisions

Some lease clauses, including the names of all parties and the address of the rental property, are relatively standard. However, other lease clauses may depend on the limits of landlord-tenant laws. Standard residential lease clauses include but are not limited to the following:

• Names of all parties to the lease
• Description of the rental property
• Length (term) of the lease
• Amount of monthly rent (rental rate)
• Day of the month by which the tenant should make rent payments
• Late fees (if applicable)
• Pet policy
• Common area maintenance
• Security deposit

Common terms for a commercial lease agreement differ significantly from those for a residential lease agreement.

Commercial Lease Agreements

Most prospective commercial tenants negotiate their lease agreements. Commercial lease agreements can cover different types of commercial spaces, including retail space and office space. Many prospective tenants need space to meet their business needs and budgets. Commercial real estate agreements often involve more negotiation due to their complexity. Despite this, commercial leases do have a few common lease provisions. These include but are not limited to the following:

• Gross lease: In this type of lease, the tenant pays the entire base rent, while the property owner pays the operating expenses.
• Net lease: The commercial tenant pays the base monthly rent, plus property taxes and maintenance costs.
• Double net lease: The tenant must pay the base rent plus two of the following three expenses: taxes (property taxes and real estate taxes), insurance, or maintenance costs.
• Triple net lease: The landlord passes on their operating expenses to the lessee. The tenant pays base rent plus taxes, insurance, and operating costs.
• Base rent is often tied to the total amount of square footage.
• Consumer price index: In some leases, the landlord or property management will tie annual base rent increases to the consumer price index.
• Occupancy limitations: Property management may impose occupancy limits depending on local zoning to comply with zoning and housing codes.

These are just a few lease terms you may find in a commercial lease agreement. Given the complexity of these agreements, anyone contemplating a commercial lease should first seek legal counsel.

Unenforceable Lease Provisions

Some lease agreements contain unenforceable lease provisions. For example, no court will enforce a lease provision that violates fair housing laws. A few examples of unenforceable provisions:

• Lease clauses allowing the landlord to enter the property at any time without warning
• Lease clauses stating that the tenant will pay for common area repairs
• Lease clauses in which the tenant agrees to give up the implied warranty of habitability

Ending a Lease

Real estate leases should tell you exactly how to end a lease. Many residential leases provide a specific window to renew or end your rental or lease agreement. Many tenants, both commercial and residential, either agree to extend the lease or part ways. However, state laws often provide some guidelines.

In some jurisdictions, if the tenant continues to pay rent after the lease term ends and the landlord accepts the rent, the lease will automatically convert to a month-to-month lease. These renters are called “holdover tenants" because they have stayed beyond the end of the lease.

After you have moved out at the end of the lease, your landlord will inspect the rental property before returning your security deposit. Landlords can only deduct damages beyond normal wear and tear or cleaning from the security deposit. The landlord should keep records of any deductions and send a copy of the deductions to the former tenant. The landlord must return any amount left over to the former tenant within the time frame set forth by local law.

Get Legal Help

Rental and lease agreements are legally binding contracts. Breaking a contract comes with severe consequences. Whether you are a property owner or a prospective tenant, an excellent real estate attorney can help you. An expert in real estate law can advise you on lease clauses or negotiate your commercial lease. Speak to an experienced real estate attorney today.