Whether you own rental properties or you’re looking for a new home, you will be faced with the complicated task of securing an agreement. For some people, this detailed process will be delegated to their lawyers or legal counsel. However, most people do not have the luxury of hiring legal help and thus write contracts on their own. This leads to a lot of complications in the long run since some paragraphs or “clauses” can be deemed illegal in your state. To save you from this headache, FormsPal has released free Rental and Lease Agreement Templates on this page. Feel free to go through our guide, too! It may give you valuable and updated insight into this leasing process.
Commonly known as a “rental agreement” or “contract of lease,” this legal document details the conditions set by the owner of the house, building, car, or equipment. More than anything, these conditions or lease terms should be based on state laws and fairly indicate who will become accountable for certain occurrences. The person who will be occupying the property for a certain period of time will then review the document, and if agreeable, abide by the rules of the contract for the period of their stay.
Here are the general terms that you will be encountering with the said agreement :
This type of lease often entails the use of the entire rental property for a fixed period of time, often a minimum of one year with no limit for the number of years. These are typically used for houses, apartments, and condominium units. The downside of this residential lease is that the tenant may have to forfeit their security deposit if they leave before the term ends.
Periodic leases are also called monthly leases or “tenancy at will” because the agreement only lasts for a short period of time. They may renew the contract or terminate the rental lease agreement, provided there is a 15 or 30-day notice (depending on your state). This setup may not be for everyone since the landlord has the right to increase the month’s rent without notice.
Some apartments or condominiums are run by co-ops. In such a case, the tenant will purchase “shares” or “stocks” to become part owners of the building. The co-op group will then act as the landlord to collect the month’s rent, become the building’s property manager, and facilitate day-to-day operations while the shareholders give their “monthly dues” instead of their month’s rent.
In some cases, the landlord is also a residential tenant who has secured a fixed-term agreement with the property owner. This happens through subleasing (also known as “sub-letting”) where a smaller space like a room or a unit, for instance, is rented to someone else. However, it is important to go through the original rental lease agreement since this setup often becomes complicated in the long-run.
In this rare type of agreement, the landlord has the intention to sell the property but the potential tenant cannot make a big downpayment. In such a case, a bank loan may not be an option. So, the landlord accepts a higher security deposit and advanced rent payments. There is no limit to the number of months to pay off the rest of the “mortgage,” so the landlord and tenant can determine this in writing. Once complete payment has been made, the title will be transferred to the renter.
The most common type of lease for businesses is the commercial lease, where the property is located in a highly-populated area with high foot traffic. This location could be in malls, along major roads, or in business districts. In addition, the landlord may agree to use the address in the business registration of the tenant company.
Like the residential lease, this involves a higher month’s rent that lasts for a fixed and longer duration. Amount paid to the landlord may actually be more than the current value of the property because of interest and other lease charges. Due to the business potential of the property, however, some companies opt to rent rather than purchase.
An operating lease allows the use of a property or asset for a short but fixed period of time. In this case, the tenant company will shoulder all additional expenses for the duration of use (e.g. maintenance, repair, utilities, etc.). Once the landlord and tenant decides to terminate the agreement, a notice will be required, as with a standard to short-term rental agreement.
Similar to rent-to-own, this type of lease lasts for a few years with the intention to transfer the title to the tenant. This may be an option for growing businesses that may gain more with a rent payment scheme that allows them to gather more funds over time. Again, this type of rent may be rare and may possibly cost more due to interest.
Like a proprietary or co-op lease, the value of the rental property may exceed the financial capability of one person or company. In this case, he or she may find a co-owner and both share the cost of the mortgage. In a sense, both serve as the landlord and tenant of the property.
A tax-oriented lease or a true lease is one that qualifies for some government tax benefits to either or both of the lessor and the lessee. To do this, the lessor may depreciate the value of the asset and claim tax credits. In turn, the lessee will also have lower rent for the said period.
Sometimes, a tenant may fail to pay their month’s rent, so the same asset or property is leased by the landlord to another tenant until rent payments become stable. This is dubbed as a “non-payout” lease. On the other hand, the full lease helps the landlord recover the property’s full value by leasing it out.
In a sales aid lease, the rent payment for the asset or rental property is shouldered by both the tenant and the landlord through a sales agreement. Oftentimes, the tenant is the manufacturer or the supplier, while the landlord helps in the sales of the product. This partnership often results in a better return for the landlord if the business goes well.
In a non-net lease, the landlord may retain total control and responsibility for the rental unit including maintenance and repair. In the case of net lease, the landlord does not concern himself with the above-mentioned issues, and the tenant shoulders any damage to the property. In some states, this may not be legal, so it’s best to check your state’s rental laws.
In a specialized service lease, an asset or special equipment is being rented. Because this special asset would require knowledge of its operation, the lessor will include the cost of a specialist or property manager to handle the equipment. This setup is common to construction equipment, high-value electronics, and studio devices.
A common lease agreement in the logistics industry, this rent allows for securing rentals in different countries. It is usually done on a fixed basis involving detailed contracts and securing government permits in addition to the lease agreement. This may also be an option for people who frequently travel back and forth to two or three different countries. However, a fixed payment location must be specified in this type of rent.
Quite similar to cross-border lease, an international lease happens when the landlord and tenant make the rental contract while they are in two different countries. In this case, they are also subject to the risk of currency fluctuations but may have no other option as the tenant will get his funds from the other country. This is a common setup for international students or businesses that are expanding their global reach. For this type of rent, you may want to hire a real estate agent.
Though somewhat complicated, sales and leaseback happens when the company or tenant sells one of their equipment or asset to the landlord. However, they remain to be its sole user and now pay the month’s rent for it. Legally, the landlord is now the owner of the equipment, but it remains with the tenant so that the company can sustain its business.
Import lease is another type done internationally but involves only equipment and not property. This happens when a person from the U.S., for example, rents a piece of equipment owned by a lessor from another country. In this case, the equipment is imported, because it is already in the U.S., but the payment is sent to another country.
The words “rent” and “lease” are typically used interchangeably. However, they do differ in connotation regarding the agreement’s duration and flexibility. For instance, a rental agreement gives the impression that the agreement is short-term, usually three to six months and renewable thereafter. In the case of renting a car or a stall, a one-page agreement may be signed. A lease agreement, on the other hand, is a contract that lasts up to a year or more. Since the duration varies, the length of the document may also be more detailed to ensure that the property is taken care of. Still, these two still fall under the same legal category, whether short-term or long-term. Both of these also have their pros and cons, so it’s best to carefully consider the conditions stipulated in the agreement to be fair to both parties.
A lease agreement is often associated with commercial properties, which are rented for the purposes of business. Naturally, these would be for long-term use and have more stipulations that benefit both the landlord and tenant. One of these clauses may address concerns based on the Health and Safety at Work Act of 2015 since the property will be used by employees.
In contrast, a tenancy agreement is a technical term used for residential properties, where the conditions do not need to be as stringent as that of commercial rental properties. This is covered by the 1986 Residential Tenancies Act for the protection of both the landlord and tenant.
In a lease agreement, a “transfer of interest” may be possible, which results in an unauthorized sale of the landlord’s property by the tenant in ill-intent. Unlike the lease agreement, however, the Leave and License agreement tapers more toward the welfare of the landlord and prevents such occurrences from happening. The lease agreement is also transferable and inherited, but the leave and license cannot be passed onto others. Like an owned property, the lease agreement does not stop once the tenant has died, but the leave and license agreement automatically make the rental contract subject for renewal. These differences protect the landlord from criminal acts in case he or she has failed to do a complete background check on the tenant.
The main difference between lease and contract for deed lies in the payment setup and owner of the property. In a typical lease agreement, the tenant cannot own the property but instead pays for the “right of access” to the property. He or she may then be evicted with notice should he or she fail to pay the month’s rent or violate the agreement.
Meanwhile, a contract for deed is the agreement for a rent-to-own set-up. Here, the seller or landlord keeps the title until the buyer or tenant completes the monthly payments. Though this may look advantageous in the long run, this payment scheme also has its cons. If the tenant fails to pay the monthly rent or “mortgage,” the property will become foreclosed and they will lose the down payment and rental.
A residential lease is for private and non-business tenants. These rental units may be located in residential areas and communities. In this type of lease agreement, the house rules are typically more lenient and have additional provisions for other occupants, pets, and upkeep maintenance. These agreements are also covered by the 1986 Residential Tenancies Act as well and requiring additional paperwork for houses that have lead-based paint.
Commercial leases are for properties located in business districts and busy areas. These typically have higher monthly rental fees, which businesses take as an investment in exchange for the prime location. These types of leases have more details than a residential lease and are tailored-fit for the tenant company’s industry and operations. For instance, malls include penalties for stores that do not open on time or remain closed during mall hours. On the other hand, buildings built for small offices may have provisions for the health and safety of their workers.
The landlord typically has the responsibility to come up with a rent or lease agreement for the tenant’s review. The landlord will need this as soon as he or she decides to rent out a property. On the first meeting with a potential renter, he or she will most likely ask the landlord about the rental agreement. Are pets allowed? How much is the parking fee? Who will be responsible for the upkeep? It is important to have a draft of the agreement even before renters come in so that no one’s time is wasted. Take note that the agreement may still be revised to balance out the needs of both parties, so it’s important for the landlord to know his or her non-negotiables.
Do you want to rent out your property, but don’t know where to start? Here is a step-by-step guide to help you through that process:
The most crucial step in leasing your residential property is research. To attract a good tenant, you must check how the home compares with others. Consider the following when you do your research:
Most busy landlords prefer to get Real estate agents, who will take care of the first steps of the process. While this is the best decision for some, others prefer to do this on their own through posting on online renting platforms like Airbnb, HomeAway, and VRBO.
When doing this on your own, it is best to get high-quality photos that will showcase both the interior and facade of the real estate property as honestly as possible. Include your contact information and be prepared to answer phone calls and text messages throughout the day when this happens, as many potential tenants will want to get in touch. It will be useful to save a templated message so you can easily reply.
It is best to free up your time on weekends or certain parts of the day for viewing. You may also assign someone reliable to handle this for you. Make sure to confirm the viewers’ identity and have someone with you for security purposes. Then, you may give a complete tour of the property.
As soon as the viewing is done and the potential tenant shows interest, you may give them the rental application form, which will ask for the contact information of his or her references. This document may also contain a checklist of necessary requirements for their background check like a copy of the government-issued IDs and police clearance certifications.
Even with their papers, it is important to do a full background check. You may call their references or get in touch with their old landlord. In some states, the landlord is required to go through the strict process of declaring the rental transaction to help the tenant’s future landlord do a more thorough background check. You may also want to check each document that the tenant has submitted.
If you only made a checklist of your conditions, now is the time to integrate these into your rental or lease agreement. It is crucial to check the legal basis of each paragraph, so as not to make your rental lease agreement void or illegal. Some states may have specific caps on the financial aspect of leasing agreements and may have strict guidelines on upkeep, penalties, and termination. We know how difficult it is to check these details on your own, so we’ve prepared a free residential lease agreement form for you below:
After your potential tenant reviews the agreement, he or she may ask for certain revisions. It is up to you to negotiate or remain strict with the terms set forth in the agreement. If they agree, both of you must sign on each page of the document and get it notarized.
Once you have finalized the agreement, you must get the following:
Make sure to formally “receive” the payment by giving him or her an official receipt or a signed paper stating the rental amount, date, and purpose of the transaction.
Likewise, the tenant must also properly receive the keys of the property. Both must document the completeness of the keys and test if they work. It will also be good to do a walkthrough inspection of the home and take further photos of damages, leaks, and other details that show the current state of the home. By doing so, both parties will know who will be responsible for future damages or wear and tear.
If you encounter hiccups along the way, make sure to document everything. It will be helpful to check for the legal basis of your actions since U.S. laws aim to protect both the landlord and tenant.
Since most landlords do not want the hassle of writing their own rent or lease agreements, some of them go for a tried-and-tested rent contract. You may download a free MSWord standard lease agreement form on our site. Alternatively, you can use our convenient step-by-step document builder to create your customized agreement and download the completed form. Make sure to check the Landlord-Tenant laws in your state while you are doing so.
Oftentimes, hiring a lawyer to write the agreement will be subject to attorney fees. However, one can easily find a legal agreement template on FormsPal. For those who want to further understand the content of a residential lease agreement and how to write one, here is a quick step-by-step checklist:
At the very beginning of the agreement, the “landlord” (the lessor) and the “tenant” (the lessee) must be identified.
This part may be discussed in different paragraphs of the agreement but must include the monthly rent computation, penalties, grace period, security deposit, pet deposit, and additional fees.
The agreement will also contain the complete location of the residential property as well as a declaration of existing features such as furniture, appliances, pools, garden, parking, etc.
Apart from indicating terms for use, the agreement must also contain specific house rules for pets, parking, and use of common areas. It must also list other conditions deemed necessary by the landlord but has to be fair to the tenant.
Depending on the type of rent, a duration must still be set. So, it is crucial to indicate the date of commencement as well as the ending date. This will be followed by the condition for renewal.
Some rental or leasing transactions require a guarantor. If the tenant’s credit score is enough to sustain the monthly rent, then a guarantor is no longer needed. However, some landlords are better assured with this additional “safety net” if the tenant’s income is not 40 to 45 times the monthly rent.
Although the responsibilities between the tenant and the landlord are already governed by state laws, it is crucial to include these into the agreement. For instance, some states require landlords to cover the periodic maintenance and insurance of the home. On the other hand, the regular household duties (e.g. lawn mowing and trash collection) and repair of damages (caused by the tenant or the occupants) will be the responsibility of the tenant. These are discussed in the latter clauses of the contract leading up to the indemnity agreement.
Once the contract is violated, written notices will be sent by either party. If violations continue, the agreement may be ended and a notice to terminate will be sent at least 30 days before the tenant is scheduled to vacate the premises. However, the security deposit may be withheld by the landlord until the tenant can properly turn over the property.
If a home is built before 1978, it may contain harmful lead-based paint. Some homes have some safety hazards like termites or mold, which can affect the living condition of the tenant. Therefore, it is important to have this rider attached to the main contract.
Declaring things that may affect either party is crucial to maintain transparency. Otherwise, this could affect the agreement and the party that withheld information may be held liable for violations. Here are some addendums and disclosures one must attach to the agreement prior to the commencement of the rent or lease.
The Landlord also has the responsibility to disclose any information that may affect the tenant’s living and health conditions such as water damage, mold, and use of hazardous materials (e.g. lead-based paint, asbestos, and radon). These can be disclosed by adding riders to the contract.
Yes. Before typewritten agreements, all legally-binding agreements were handwritten. It is still true up to this day. However, a handwritten agreement must be scrutinized, since one can easily add terms after it has been signed by both parties. One way to prevent this is to sign right below the last paragraph on each page to make sure that nothing is added.
Verbal contracts are only binding between the two parties who agreed. However, should complications arise and the problem is taken to court, the he-said-she-said nature of this agreement will delay the process, negatively impacting both parties. Without a written contract, questions cannot be answered and the governing law will have difficulties in determining the winning party.
According to the Civil Code, a contract is “a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something, or to render some service.” To make an agreement valid, the following must be present:
Consent – There should be evidence of an agreement.
The name and signature of both the landlord and the tenant must be seen in all pages of the contract. Furthermore, their mailing addresses and Identification Card numbers should be reflected in the document as proof of identity. This strengthens the agreement’s enforceability.
Object – These are goods or services.
In this case, this is the property being rented. The following additional details regarding the said property should also be discussed in the agreement:
Cause – This is the reason for the agreement, which is often for mutual benefit.
This is stated in the beginning and must contain the duration of the rental agreement.
In order to avoid complications in rental or lease agreements, it is best that other arrangements are also written in detail. Both the landlord and the tenant may include clauses for the following:
Yes. Initially, you may show the agreement as proof of residency. However, the tenant will need to get a clearance or an official identification card later on. These are better proofs of residency.
Both a sublet and sublease have someone else involved in the agreement. The main difference is who remains to be responsible for the property. In a sublet (also known as “relet”), the third-party tenant becomes responsible for the property and directly pays the landlord. On the other hand, the original tenant will still be responsible for the entire property in the case of a sublease.
A lease can be broken with a series of violations made by either the tenant to the landlord or vice versa. However, it is always best to end the agreement in good terms through a simple written notice. If this will push through, the party who wishes to break the agreement may have to pay fees or surrender a portion of the security deposit. Should there be a dispute, a lawyer may have to step in and both will be required to pay the corresponding attorney fees.
In a rent-to-own agreement, the landlord is “selling” the property but is giving the tenant time to slowly pay off the mortgage. In the meantime, the title is still with the landlord and doesn’t turn it over until the full rent payment has been made. This happens when a potential tenant may not have enough credit score to make a bank loan, but the landlord wants to sell the house instead of renting it out. So, both parties agree on this mutually beneficial setup.
Depending on the Landlord-Tenant Act of each state, a violation is often addressed with a written notice. However, once it recurs, the landlord has the option to terminate the agreement by sending a Notice of Termination of Lease at least 30 days before the tenant’s last day unless otherwise specified by the state. After this, the landlord may withhold the security deposit until a thorough check of the property’s condition has been finished.
A month-to-month lease is short-term and is often renewed at the end of the month. In contrast, a fixed-term lease is long-term and often lasts a minimum of one year. The guidelines for each may be checked with your state’s Landlord-Tenant Act.
The agreements in the rental contract can be changed by attaching an amendment to the contract. This amendment must also detail the cause of the change with the new agreement. Like the original rental or lease agreement, it must also be signed by both parties and notarized.
Backdating is permissible for some cases in order to make the commencement of rent more accurate. This happens when a tenant moves in earlier than expected and the landlord agrees to this. However, legally, this is questionable and is often the source of fraud and other complications.
The guidelines and minimum period for giving notices may vary from state to state, but it often arises out of the following:
A written contract is the most crucial document in a leasing agreement. Still, renting and leasing in the United States does not have to be overly complicated. There are already templates available for use that have gone through legal review. One of these is our rental agreement form, which you can download above. These contain provisions to make sure that the agreement is fair. Still, landlords and tenants must review state laws, which are in place to protect the welfare of both the landlord and tenant.