Lease Agreements – Part 3
Lease Agreements – Part 3
We continue our series regarding “Lease Agreements” with a discussion of what should be in a lease agreement and what should not be.
Lease Issues
There are many issues that must be included in all lease agreements, whether residential or commercial. There are still more issues that should be included, and yet more that will be covered in a “good” lease. In general, all leases, whether residential or commercial, may cover the following or similar issues (not necessarily in order of importance):
- Date of execution.
- Lessor (landlord) and lessee (tenant) information – may be a property management company for lessor and lessee will usually be the one responsible for paying the rent.
- Identification of the leased premises – street address, unit number, city, state.
- Term of the lease – beginning and ending dates.
- Security deposit, other deposits and fees, and/or last month’s rent – the amount must be within maximum limits allowed by state law, and should specify when and how the deposit will be returned, must disclose where deposits be
kept in some states, and can state the rate of interest to be paid to the tenant where interest is required. - Rent issues – amount, pro-rated amount for partial month, manners of payment (cash, personal check, bank check/money order, electronic), when due, where paid, any grace period, and sometimes specified future increases.
- Late charges – within the limits allowed by particular state.
- Penalties for returned personal checks or other transaction failures.
- Conditions of possession including rent & deposits that must be paid at execution, before possession, and/or following lease commencement.
- Any repairs or improvements to be completed by the landlord before possession or by a later specific date.
- Joint and several liability for all who sign the lease.
- Utilities paid by landlord and utilities paid by tenant.
- Appliances or equipment provided or not provided by landlord.
- Maintenance responsibilities of each party.
- Use of premises: Residential – residential purpose only, names of all occupants, and not to be used for illegal purposes. Commercial – specific allowed and prohibited business uses.
- Pet policy – prohibition or specific ones allowed or not allowed, must not discriminate against assistance animals.
- Alterations, additions – those allowed and those prohibited – including no addition or changing of locks without written permission.
- Access by landlord or landlord’s agents, specifying notice period for non-emergency; some states allow lease agreements to supersede statutes.
- Assignment and/or subletting and/or roommate, prohibition or conditions and approval process.
- Abandonment or extended absence by tenant without notice to landlord.
- What happens in event of fire or other casualty making space unusable.
- Lease renewal procedures.
- Holding over terms – usually reverts to month-to-month, but sometimes automatic renewal for specific term, often with rent increase and/or other changes in lease terms in either case.
- Hazardous materials prohibition.
- No smoking allowed – many landlords and property managers are now prohibiting smoking in their units and some city governments passing ordinances prohibiting smoking in multi-unit residential buildings.
- Eminent domain.
- Lease subordinate to mortgages and lease not to be recorded.
- Binding on heirs.
- Notices – address and manner of delivery for legal notice to each party.
- Parking restrictions and/or assignment.
- Insurance: Residential – advise or require tenant to insure own possessions;
- Commercial – requirements to provide specific insurance coverages.
- Remedies are cumulative & non-waiver (specific waiver of terms doesn’t waive future right to enforce).
- Tenant’s remedies in case of landlord default.
- Landlord’s remedies in case of tenant default.
- Tenant not to withhold rent unless there is a valid reason allowed by statute.
- Termination notice requirements and vacating procedures, including penalties in accordance with state law.
- Abandoned property – as allowed by state law.
- Homeowner/property owner association issues.
- Severability and survival of lease clauses and validity of each part.
- Grounds for termination – defaults of material terms & conditions and specific items, e.g., criminal activities.
- Estoppel and/or Attornment.
- Dispute resolution – mediation or arbitration.
- Rules and Regulations – state that they are made part of the lease agreement (usually reference to separate document).
- Attorney fees and Court costs.
- Entirety of agreement.
- Additional terms and conditions of importance that are not contained within the printed agreement – for example, modifications necessary for handicap accessibility.
- Signatures.
- List of exhibits, if any.
- Indemnity clause.
- Disclosures.
Residential leases often cover the following issues that are not usually part of a commercial lease:
- Occupancy – the maximum number of persons that will reside in the premises should be in line with federal, state, and local guidelines and must not cause discrimination against protected classes.
- Lead-based paint disclosure if built before 1978 – may be separate document and must be as specified by federal and state laws.
- Waterbed clause – may be separate agreement or in Rules & Regulations.
A pet agreement or lease clause should be clear regarding which types of “creatures” are allowed and/or prohibited. When dogs are allowed, the clause must also define breeds because certain breeds are excluded from liability insurance coverage in some policies.
Unlawful Provisions
Some types of lease provisions are not permitted by law. The lease should not contain provisions that require the tenant to waive his or her rights under federal, state, or local laws. Such waivers are unenforceable and may cause the lease to be voidable. They can make the landlord subject to penalties. The following are some common examples of unlawful lease provisions:
Provisions contrary to anti-discrimination laws – The lease may not contain provisions that violate federal, state, or local fair housing laws or the Americans with Disabilities Act. For example, it is illegal to include a lease provision that
prohibits subleasing to members of minority groups or a provision that charges a higher security deposit to a disabled tenant or to a family with children.
Eviction of the tenant without due process – The tenant may not be removed from the unit without notice or a hearing on the issue. Similarly, in almost every state leases may no longer contain a landlord lien clause, a provision that permits a landlord to take possession of the tenant’s personal property without due process because of non-payment of rent. In fact, many states have very complex laws regarding how the landlord must handle abandoned property even when the departed tenant owes the landlord a substantial amount of money.
Waiver of habitability by the tenant – The lease may not contain a provision in which the tenant agrees to waive the landlord’s warranty of habitability or hold the landlord harmless for breaches of the warranty. The “as-is” clause
that is sometimes found in real-estate purchase agreements is not a valid lease clause in most states. In most states a landlord is required to keep a residential rental premises habitable. Additionally, the landlord can be held responsible for injuries that result from the condition of a rental property, regardless of a habitability lease provision, or the tenant agreeing to correct the problem.
Typically, the term habitable includes major systems such as roof, plumbing, heating and/or cooling equipment (depending on location), structural elements, or any unsafe condition. Carpet stains, paint defects, and other cosmetic items generally do not affect the habitability of the home unless they present a health hazard.
Waiver of the landlord’s legal responsibilities – Provisions that waive the landlord’s legal responsibilities are void. Two examples are: a provision that prohibits the tenant from holding the landlord responsible for the landlord’s negligent acts or a provision that attempts to circumvent landlord tenant law.
Provisions that penalize the tenant for complying with the law – The lease may not contain a provision that penalizes the tenant for informing government authorities of any landlord violation of the law. For instance, a lease provision that calls for immediate eviction if the tenant informed the building or health authorities of an unsafe condition on the premises is not permitted. In fact, laws of most states now address so-called “retaliatory eviction” and
prohibit eviction for any cause immediately (sometimes up to 6 months) following a complaint to authorities.