What is a Rental Lease Agreement?
A rental lease agreement is a written contract between the landlord and the tenant. The agreement guarantees the tenant’s right to occupy the property for a specific period in exchange for monthly rent payments made to the landlord. The lease typically outlines the monthly rent amount, any required security deposit, the duration of the lease, and the terms and conditions for using the property.
The Rental Process
Step 1 – Lease Type
Before listing a rental property online or making it available for showings, property owners or landlords need to decide on the type of lease they want to offer. They can choose between a long-term or a seasonal (short-term) lease. If the intention is to rent the property out for an extended period, landlords can offer annual leases with an option to renew every year.
Most Common Lease Types:
- Long-term lease – A lease contract valid for a minimum of 12 months.
- Short-term lease – A lease contract that is either set at a duration of less than 12 months or on a monthly (month-to-month) basis.
- Vacation lease – An agreement used for arrangements of one month or less.
Step 2 – Listing Property for Rent
Advertising rental properties can vary depending on the local market and the target audiences. Landlords or property owners can choose from different advertising platforms, but it’s essential to be transparent about the property’s condition, updated photos, and prices to simplify the rental process. You can also consider hiring a real estate agent to manage the rental process. It’s recommended to list your property on national websites to attract out-of-state and international renters. The national markets to consider for your property class include:
- High-end markets – Sotheby’s, Rent.com
- Middle-cost markets – Zillow, Redfin
- Low-budget markets – Craigslist
Step 3 – Prepare a Rental Application
A rental application serves to uncover three (3) major concerns for an owner of property about a prospective tenant:
- Criminal history;
- Credit history;
- Previous evictions by prior landlords.
If a tenant passes all three significant concerns, it’s now time to proceed with verifying employment and means of paying rent. Landlords have the legal right to ask for government-approved identification, a social security number, and an applicant’s legal status within the U.S.
The Fair Housing Act, 42 U.S.C. 3601, prohibits landlords and property owners from discriminating (denying) prospective tenants the ability to rent based on the following criteria:
- familial status or national origin;
- race or color;
Ways to Screen a Tenant:
- TransUnion SmartMove – TransUnion offers a tenant screening service called SmartMove. It allows landlords to request credit reports and criminal background checks on prospective tenants. SmartMove provides a credit-based recommendation that helps you assess the tenant’s financial stability and risk profile.
- Experian Connect – Experian offers a similar service called Experian Connect. Landlords can request credit reports and view a tenant’s credit history. This can help you gauge their creditworthiness and financial responsibility.
- Local Court Records – You can check your local court’s website or visit in person to search for eviction records, judgments, or any legal disputes involving prospective tenants. This can give you insight into their rental history and legal issues.
- Social Media and Online Searches – Conducting online searches and checking social media profiles can provide additional information about a tenant. While this isn’t an official screening method, it can give you an idea of their lifestyle, behavior, and any red flags.
Step 4 – Tenant Views the Space
Depending on the property owner, one may choose to require a rental application from the applicant either prior or after viewing the property. Typically, landlords in large cities ask for the rental application after a tenant views the property. There could be disclosures you will need to offer each tenant before they view the property, depending on the state.
The most common disclosure required by the federal government is the Lead-Based Paint Disclosure, which requires owners of property built before 1978 to give prospective tenants a pamphlet (PDF) detailing all known information about lead-based paint on the parcel before signing a lease.
Step 5 – Verify References
Landlords and property owners should be particular when asking for references from a prospective tenant. Asking of personal friends or family as references serves little use. There are no laws or limitations an owner must abide by when contacting references given on a rental application.
When asking for references, it’s best to ask for the following contacts:
- Previous and current employer;
- Prior landlord/owner of rented property.
Step 6 – Approving the Tenant
A landlord can approve a tenant for any reason. However, when it comes to rejecting a tenant from occupancy, the landlord must give the reason (which must be legal) as to why. In most cases, a rejected application is due to a negative report on a credit report. Landlords can require prospective tenants to add a co-signor or increase upfront rent to be approved.
The Fair Credit Reporting Act requires property owners/landlords to disclose the information as to why a rental application was denied. Landlords must provide the denied applicant with the following:
- A written statement explaining the adverse facts;
- A source of the reporting agency;
Step 7 – Signing the Lease
Leases can be signed online using services such as DocuSign or eSign. If the lease is signed in person, having the lease notarized is recommended. Property owners do not need to be named on the lease if a property management company controls the property (check with state laws to be specific). Verbal agreements are not legally binding; therefore, a contract must be in writing.
Who Signs the Lease?
- All persons who have applied to reside at the property;
- Owner or manager of property;
- If signing in person, a notary (public officer) is recommended.
Step 8 – Occupancy
The tenant has the right to occupy the property on the start date stated within the lease agreement unless otherwise stated. Once the tenant has begun to occupy the property, the owner loses their right to enter it without proper notice (see Landlord-Tenant Laws below).
Most U.S. states follow the rules set out by HUD, a department of the federal government that administers laws and regulations regarding housing. The most common laws regarding security deposits are as follows:
- One months rent – Landlords are allowed to ask for a security deposit equal to 1 (one) month’s rent;
- Interest bearing account – Security deposits must be kept in a separate interest-bearing account;
- Unpaid Dues – The Landlord may use the security deposit as reimbursement for any unpaid dues when the lease expires;
- Refund – The landlord must return the security deposit in full within 30 days of notice;
- If dues are deducted from the security deposit, the landlord must include an itemized list of deductions.
Source: § 880.608 Security deposits.
How to fill out a rental lease agreement?
STEP 1 – The date on which both parties agree to the agreement.
STEP 2 – Landlord’s Name – If the landlord is a company, enter the company name.
STEP 3 – Landlord’s Address – The landlord’s street name and number.
STEP 4 – The landlords City, State, and Zip Code.
STEP 5 – The tenant’s full legal name that matches a government-issued ID.
STEP 6 – The tenant’s street name and number.
STEP 7 – The tenant’s current City, State, and Zip Code.
Abandonment – The act of vacating the premises before fulfilling the terms of the agreement, without prior notice or consent, is considered abandonment.
Boilerplate Contract – Clauses in lease agreements that correlate critical legal points.
Landlord and Tenant, also known as lessor and lessee, contract for leasing real estate. The landlord agrees to let the tenant use the property for a specified period in exchange for rent.
Lease Agreement vs. Rental Agreement – A lease agreement is usually for long lease contracts, typically 6 months or more, and a rental agreement is usually for short-term leases of 30 days.
Property Rentals – Real Estate assets that are owned by individuals and/or entities (businesses) which are rented out to Tenants/Occupants for a specific period of time in exchange for rent payments.
Q. What is a Rental Agreement Form?
A. A rental agreement is a contract that lasts a month and is similar to a lease in many ways. It’s different from a lease in that it is automatically renewed and a rental agreement does not require the same level of commitment.
Q. How do you get out of a lease agreement?
A. Laws are in place that override the the lease agreement where the tenant can break the contract. For example, if health and safety codes are not met, then the tenant can break the lease. Check local laws to see if you qualify.
Q. How do you spot a fake lease agreement?
A. Some lease agreements are fake; here are the top ways to spot one: the landlord asks for a large deposit, the landlord puts time pressure on you to sign the agreement, and the lease agreement does not allow you to legally get out of the lease respectfully.
Q. How to cancel a lease agreement?
A. Landlords usually require a 30-day notice, although it’s best to check with local laws and your lease agreement. The lessor and lessee MUST sign a letter stating the cancellation to be legally binding.
Q. What is a triple-net lease agreement?
A. The tenant agrees to pay for ALL expenses/bills of the rental property, including taxes, insurance, and maintenance.
Q. Where can I find the Commercial Lease Agreement?