How to Draft a Lease Agreement
A lease agreement is a legally binding contract between a landlord and tenant that outlines the terms and conditions of a rental property.
It is an important document that protects both parties by spelling out each person’s rights and responsibilities.
When drafting a residential lease agreement, there are several key sections to include that cover all the essential information needed to make the rental arrangement clear.
Having a comprehensive lease allows both landlord and tenant to avoid disputes by referring back to the original agreed-upon terms.
This guide will walk through the key components to include when putting together a rental lease agreement for a residential property.
Following these steps will produce a document that abides by state laws and allows for a smooth landlord-tenant relationship.
How To Create Your Own Lease Agreement
While hiring an attorney is always advisable for reviewing a lease agreement, some landlords and tenants may want to draft their own documents. This can be an affordable option for basic, straightforward lease agreements.
There are a few steps you can take to create your own valid lease:
- Start with a standard lease template that follows your state laws as a base document. You can find these templates online or in books/software.
- Customize the sections by inputting your own specific lease details like rent, deposit amount, length of lease term, etc.
- Add any optional clauses that you want such as pet policies, sublet terms, or maintenance duties.
- Carefully proofread the document once complete to catch any errors.
- Consider having a lawyer review the final agreement, even if just for an hour, to ensure you include all required provisions and disclosures.
- Both parties should initial each page and sign the final page. Make copies for all parties to retain.
While more complex than a basic room rental, creating your own lease is feasible in many cases if you educate yourself on state laws and use a proven template. Customizing the document allows you to tailor the provisions to your specific property and needs as a landlord or tenant. Be sure to involve legal counsel for a final review before signing any lease you draft yourself.
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California lease agreements
Here is another section covering lease agreement templates and California lease agreements:
Lease Agreement Templates
When creating your own lease as either a landlord or a tenant, one of the best starting points is to use a lease agreement template. Lease templates provide an outline of required clauses and common provisions so you don’t have to write a lease completely from scratch.
There are many free lease template resources online that can be downloaded and customized to your specific rental property and situation. Some options include:
- Generic state-specific lease forms
- Forms drafted by real estate organizations
- Templates provided by property management software companies
- Lease sample clauses published by legal sites
Be sure to choose a template that is applicable to your state and fits your rental type such as residential tenancy. Then input your particular lease details like rental rate, deposit, length of lease, etc. Add any optional clauses as needed.
California Lease Agreements
If renting a property in California, be sure to use a template that complies with California law. Some key issues to address in CA leases include:
- Specifying if a rental unit is under rent control
- Stating tenant rights under state harassment and discrimination laws
- Listing valid reasons for eviction per California law
- Including Move-In/Move-Out checklist addendums
- Providing Prop 65 lead-based paint disclosures if needed
Carefully reviewing the template before completing your California lease ensures you cover provisions specific to CA rental laws. This helps provide a legally binding and enforceable contract.
Residential Lease Agreement
A residential lease agreement is a legally binding contract between a landlord and tenant that outlines the terms and conditions of a rental property.
Having a comprehensive lease allows both landlord and tenant to avoid disputes by referring back to the original agreed-upon terms.
Rental Agreement
The first section of the lease should clearly identify the two parties entering into the agreement by providing their full legal names and contact information.
Properly identifying all parties on the lease avoids confusion and ensures each person can be contacted regarding matters related to the rental property.
The next section should provide the full address of the rental unit and describe the property being rented. Describing the property in detail prevents misunderstandings about what is included in the rental.
The lease term outlines the duration of the rental agreement and associated dates. Properly documenting the term prevents confusion around how long the tenant can occupy the unit and when they are expected to vacate.
California Commercial Lease Agreement
In addition to residential rentals, landlords may also find themselves needing to draft lease agreements for commercial properties. A commercial lease is similar to a residential lease but contains provisions specific to a business tenant and property use.
When creating a commercial lease, the landlord will need to decide if they want to use their own lease agreement or the tenant’s standard commercial lease preferred for their business operations. There are pros and cons to each party using their own lease versus the other’s.
Residential or Commercial Property
Some key differences in a commercial versus residential lease include:
- Description of premises includes the type of commercial space such as office, retail, industrial, etc.
- The lease term may be longer such as 3-5 years with an option to renew
- Rent may be negotiated as a base amount plus a percentage of sales or taxes
- Tenant responsible for more utilities including janitorial and waste management
- Use of premises limited to the agreed upon business operations
- Maintenance may be split based on type such as roof (landlord) vs. HVAC (tenant)
- Landlord not liable for tenant’s business losses or damages from losses
When renting commercial property, either party can propose using their own templated lease as a starting point for negotiations. This allows them to include provisions they’re accustomed to from prior lease agreements. However, both parties should have an attorney review the final document before signing to ensure it protects their individual interests appropriately. With good negotiation and compromise, landlords and tenants can come to agreeable commercial lease terms.
Monthly Rent
One of the most important sections of the lease, this outlines the regular rent amount and due date such as:
- Monthly rent amount
- Day of the month rent is due
- Grace period for late payment and associated fees
- Accepted methods of payment (personal check, online, etc.)
Documenting this information clearly defines the tenant’s financial obligation and ensures prompt monthly payment to the landlord.
If requiring a security deposit, the lease should specify:
- Deposit amount
- Payment due date
- Description of what the deposit covers
- Conditions for returning or withholding deposit
Including these details avoids disputes over the security deposit handling when the tenant moves out.
To prevent confusion over who pays which bills, the lease should spell out:
- Which utilities are included in rent, if any
- Which utilities the tenant must set up and pay for
Making utility responsibilities clear prevents payment issues and service disruptions.
Elements to Include in a Lease Agreement
Identification of Parties
The first section of the lease should clearly identify the two parties entering into the agreement by providing their full legal names and contact information.
- For the landlord, this includes the individual owner or property management company name, address, phone number, and email address.
- For the tenant, this includes the full legal name of each tenant signing the lease as well as their contact phone number, email, and current address.
Properly identifying all parties on the lease avoids confusion and ensures each person can be contacted regarding matters related to the rental property.
Property Description
The next section should provide the full address of the rental unit and describe the property being rented. This includes:
- Street address
- Unit number
- City, state, zip code
- Square footage of the unit
- Number of bedrooms and bathrooms
- Amenities included (garage, balcony, etc.)
- Any furnishings or appliances provided
Describing the property in detail prevents misunderstandings about what is included in the rental. It also gives the tenant a clear picture of what they will be renting.
Lease Term
The lease term outlines the duration of the rental agreement and associated dates. This section should specify:
- Lease start and end dates
- Whether the lease auto-renews or converts to month-to-month
- What notice is required prior to moving out
Properly documenting the term prevents confusion around how long the tenant can occupy the unit and when they are expected to vacate. It also allows both parties to calendar important deadlines.
Rent Rate and Payment Details
One of the most important sections of the lease, this outlines the regular rent amount and due date such as:
- Monthly rent amount
- Day of the month rent is due
- Grace period for late payment and associated fees
- Accepted methods of payment (personal check, online, etc.)
- Details for dropping off or mailing payments
Documenting this information clearly defines the tenant’s financial obligation and ensures prompt monthly payment to the landlord.
Security Deposit Requirements
If requiring a security deposit, the lease should specify:
- Deposit amount
- Payment due date
- Description of what the deposit covers
- Conditions for returning or withholding deposit
Including these details avoids disputes over the security deposit handling when the tenant moves out.
Utility Responsibilities
To prevent confusion over who pays which bills, the lease should spell out:
- Which utilities are included in rent, if any
- Which utilities the tenant must set up and pay for
- Details for transferring any utility accounts to the tenant’s name
Making utility responsibilities clear prevents payment issues and service disruptions.
Usage Restrictions
This section outlines any rules around how the tenant can use the property, such as:
- Noise restrictions
- Pet policies
- Limitations on guests
- Prohibited uses of the property
Setting usage expectations upfront reduces the likelihood of conflicts during the lease term. However, restrictions should comply with state laws around tenant rights.
Maintenance Responsibilities
The lease should define who is responsible for repairs and ongoing maintenance tasks, like:
- Who performs and pays for repairs for different parts of the property
- Who is responsible for yard maintenance and cleaning gutters
- Who shovels snow and spreads ice melt
Clarifying maintenance duties helps facilitate repairs and upkeep. The landlord should comply with state laws around maintaining a habitable property.
Right of Access
This section describes when the landlord may enter the rental unit, typically for repairs or showings such as:
- Allowed frequency and notice required
- Purposes allowing entry (repairs, inspection, showings)
- Entry rules in case of emergency
Outlining access rights allows the landlord entry when reasonable and necessary while respecting the tenant’s privacy and property.
Reasons for Lease Termination
The lease agreement should explain conditions that could result in early termination of the lease, for instance:
- Tenant fails to pay rent
- Tenant violates usage rules
- Property is damaged or uninhabitable
- Tenant commits criminal acts
Documenting grounds for termination provides recourse if major issues occur while complying with state eviction laws.
Governing State Law
It is important to specify which U.S. state’s laws govern the lease agreement. This determines which laws apply if disputes arise regarding the lease terms.
Working with Prospective Tenants
When seeking to rent out property as a landlord, you will engage with a number of prospective tenants before finding the right fit. Here are some tips for working with tenants on your property:
- Advertise the rental listing to attract tenants looking for properties like yours. Include details on features, rent rate, lease length, etc.
- Require interested tenants to complete a rental application to provide their background information. Run tenant screening checks like a credit report and eviction search.
- Interview promising applicants in person and contact their references to verify their reliable rental history.
- Select a well-qualified tenant and provide them with your lease agreement to review and negotiate as needed.
Tenant’s Security Deposit
- Collect a security deposit from the tenant to provide financial protection in case they damage the unit or violate the lease. Typically deposits are equal to 1-2 months rent.
- Deposits must be returned within 30 days after the tenant moves out if they fully complied with the lease, minus any deductions for damages.
Rental Contract
- Both landlord and tenant should carefully review the rental contract before signing to ensure an understanding of the provisions.
- Walk the tenant through the property before move-in to document its condition using photos and a checklist.
- Make copies of the signed lease agreement for both the landlord and tenant records.
Rent Property
- Once the lease is signed, collect the first month’s rent and any upfront costs like a deposit.
- Legally you cannot refuse to rent to any prospective tenant based on their race, religion, family status, disability, etc.
- Comply with all state landlord-tenant and fair housing laws when screening applicants and managing the property.
Sublease Agreement
- If your tenant needs to vacate before their lease ends, allow them to assign the lease to a qualified sublessee for the remainder of the term.
- Require tenant and sublessee to sign a sublease agreement outlining rent and responsibilities.
- Screen the sublessee applicant thoroughly before approving the sublease.
Following best practices for working with tenants makes leasing your property a smooth process for all involved.
Additional Clauses to Consider
Here are some additional clauses that may be beneficial to include in certain situations:
- Pet agreement: If allowing pets, specify any associated fees or restrictions
- Smoking policy: Designate if smoking is prohibited on the premises
- Sublet terms: Define rules around subletting if permitted
- Early termination: Outline penalties for early lease termination if applicable
- Locks/keys: Indicate how many keys will be provided and provisions around changing locks
- Storage: If storage areas are assigned, describe details and permitted uses
- Laundry: Specify laundry provisions such as shared versus in-unit laundry
- Parking: List parking rights if spots are included/available
- Rules and regulations: If part of HOA or co-op, include community rules and regulations addendum
- Lead-based paint disclosure: Required for rentals built prior to 1978 per federal guidelines
- Bed bug history: Require landlord disclosure of any prior infestations and treatments
- Mold notices: Require landlord to provide any notifications related to mold per state laws
- Credit/background check: Specify tenant agrees to any screening completed during the rental application process
Carefully tailor additional clauses based on your specific property and local landlord-tenant laws.
Key Steps to Finalize the Lease
Once you’ve drafted all the main lease sections, and rental property tenants, follow these steps before signing:
- Review with a lawyer (optional): Have an attorney review the agreement to ensure it complies with state and local landlord-tenant laws.
- Include any required disclosures: Attach any state or local-mandated disclosures such as lead paint notices.
- Add inspection checklists: Create pre-move-in and move-out inspection checklists to document the property’s condition.
- Sign and date: Have all adult tenants and the landlord sign and date the lease. Make copies for each party.
- Collect the first month’s rent and security deposit: Collect any upfront payments due per the lease. Provide a receipt to the tenant.
- Change locks if needed: Replace locks and provide new keys to the tenant if the previous tenant still has keys.
- Transfer utilities to tenant’s name: Schedule transfer of power, gas, water, etc. accounts to the tenant for the lease term.
Following these best practices helps enact the lease properly and get the tenancy off to a good start.
Common Questions about Lease Agreements
Here are answers to some frequently asked questions about creating rental leases:
Should I use a template or draft my own document?
It’s recommended to start with a proven rental template. You can find free and low-cost options online to use as a base document. Then customize and add provisions specific to your property. Ensure the template complies with your state laws.
What happens if a provision violates state or local law?
Any provisions that conflict with federal, state, or local landlord-tenant laws will be considered invalid and unenforceable. Problematic clauses will be severed from the rest of the lease which generally remains binding and applicable.
Is a verbal agreement enough?
A written lease agreement provides the best protection. However, verbal rental agreements can be legally binding in many states, provided the essential terms are outlined such as rent rate and lease duration. Still, having a written record is better and may be legally required depending on your jurisdiction.
Is a notarized lease required to be enforceable?
Most states do not require a lease to be notarized outside certain circumstances like an out-of-state landlord. However, notarization adds an extra layer of legal authenticity in case lease terms are disputed later on.
Can I require tenants to have renters insurance?
Yes, you can and often should mandate that tenants carry an active renters insurance policy. Require they name you as an additional interested party. Just specify the insurance terms and minimum coverage limits right in your lease.
What happens if my tenant breaches the lease?
If the tenant violates material lease provisions like paying rent late or causing property damage, the landlord can issue an eviction notice per state laws. The lease and notices related to the broken clauses can provide grounds for eviction if the tenant fails to remedy the violation.
The Importance of a Solid Lease Agreement
Creating a detailed lease agreement that outlines all facets of the landlord-tenant arrangement helps set clear expectations and prevent future disputes. All parties should review the document in detail before signing to ensure full understanding. When crafted properly, an airtight lease serves as an invaluable reference document throughout the full rental term and protects both landlord and tenant rights.
Conclusion
A residential lease agreement is an essential document for both landlords and tenants to protect their interests in a property arrangement. Taking time to include all the key provisions and customizing the lease to your specific property ensures all bases are covered right from the start. Following proper state laws and real estate practices when drafting your lease makes the tenancy process smooth for all parties involved. Be sure to retain legal counsel if needed to review your agreement and advise you on any required disclosures. With a comprehensive lease agreement in place, landlords and tenants alike can enjoy a positive rental experience built on a foundation of mutual understanding and clearly defined rights and responsibilities.
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