Types Of Rental Lease Agreements You Should Know
Leases outline the obligations and rights of both the tenant(s) and the landlord. Let’s delve into the types of rental lease agreements that you should know.
A rental lease agreement is a written contract between a tenant and a landlord. It is signed when a tenant rents either a commercial or residential real estate property and outlines the conditions and terms of a tenancy. This means that leases outline the obligations and rights of both the tenant(s) and the landlord. Let’s delve into the types of rental lease agreements that you should know.
There are many types of lease agreements while some are more popular than others. It’s possible to rent a property for different residential properties including:
- Basement rental
- Mobile home
It’s important to note that rental leases are legally binding. Let’s say that you only want to rent a room in your home to a friend or family member. Make sure that you have a rental lease agreement in place to legally protect yourself in case any disputes arise.
Before 33 Realty team talk further about the types of leases you can obtain, it’s important to note that there are other ways that there are other names you might hear. It’s common to hear a rental agreement referred to as:
- Apartment leases
- House rental agreements
- Lease forms
- Lease agreements
- Rental contracts
- Rental agreements
- Rental tenancy agreements
- Tenancy agreements
There are various categories and types of rental agreements that exist. While some categories refer to the length of time that the lease agreement covers, others describe the type of property that was rented.
Month-to-Month Lease Agreements
One type of lease rental agreement is a month-to-month lease. Unlike traditional leases that are often 12 months, month-to-month lease agreements automatically renew each month until either the landlord or tenant provides a 30-day notice. These types of leases are ideal for short-term rentals or for landlords who need to fill their property for a short period of time. If you’re a landlord and you decide to offer a month-to-month lease option, this is an easy way to increase how much you charge for rent without losing tenants or breaking existing leases.
There are disadvantages to month-to-month leases as well. As the lease could end at the end of any month, it doesn’t give tenants a long amount of time to find a new living situation. The same can be said for landlords who will need to quickly get the unit filled.
Fixed-Term or Long-Term Lease Agreement
Another type of leasing agreement is referred to as a fixed-term lease. These are usually 12-15 months long (or another period of time depending on the landlord). It’s common for landlords to gravitate toward a fixed-term lease as it is guaranteed stable income for a longer time compared with short-term leases. Make sure to include all necessary disclosures, clauses, and addendums in this lease to stay protected as a landlord, particularly as fixed-term leases bind you to a tenant until the lease ends or the tenant is convicted.
Rent-to-Own Lease Agreement
In some scenarios, the potential buyer of a property is allowed to rent it beforehand for a certain amount of time before purchasing it from the landlord. This is called a rent-to-own agreement. There are two types of rent-to-own agreements: a lease option agreement and a lease-purchase agreement. Lease option agreements mean that purchasing the property is optional. Lease-purchase agreements require that the tenant purchases the property at the end of the lease.
These types of agreements are ideal for those who want to sell their property but still want to generate income in the short term. If you opt to go this route, make sure that you choose the right type of agreement and that the tenant is aware of the requirements.
Standard Residential Rental Lease Agreements
If you need to rent a residential property for a fixed time, you’ll likely have a standard residential lease agreement. These types of leasing agreements have common essential clauses that may differ slightly depending on your state.
Short-Term or Vacation Rental Agreements
If you only need to rent a property for a short amount of time, you can opt for a short-term or vacation rental agreement. It’s typical for these types of leases to last for a month at a time. Make sure that the lease agreement outlines all of the expected rules that the guests will follow and any information they’ll need upon arriving at the property for the first time.
A common type of rental lease agreement in Chicago is a sublease agreement. This occurs when one individual or party is renting a property from a landlord and they find someone else to rent out the property (or a room) from them. It’s common for people to opt for sublease agreements when they need to move but they do not want to break the lease agreement. Be mindful that some landlords have requirements on whether or not sublease agreements are allowed.
Room Rental Agreements
Similar to a sublease agreement, a room rental agreement refers to situations in which a specific room within the property is leased. This is an ideal type of lease agreement if you need to set specific boundaries and rules with the tenant. These agreements are also beneficial in establishing how you will divide utility and rent payments.
Commercial Lease Agreements
Commercial lease agreements are ideal for tenants who want to rent a property to operate a business. These types of leases are ideal for renting office buildings, industrial facilities, restaurants, and retail spaces.
Land Lease Agreements
This type of leasing agreement refers to renting a piece of land that doesn’t have property on it yet. Land leases are popular for serving many purposes such as agricultural, commercial, and residential needs.
Automatic Renewal Leases
A periodic tenancy is another way to refer to automatic renewal leases. This is a lease that automatically renews after a set of times. For example, automatic renewal leases may renew monthly, every 6 months, or even every year. It’s common for these leases to continue until either the tenant or the landlord provides notice indicating that they no longer need the lease to continue.
All lease rental agreements outline basic information while others contain more detail. Here are some common points to include.
Standard Lease Agreements
Here’s the information that you can expect to find in a standard lease agreement:
- Contact information for the landlord.
- Contact information for the tenant.
- Property details such as the address, square footage, and amenities.
- How long is the lease term is?
- The type of lease that it is.
- Rent details include payment frequency and schedule, the amount due, and any late fees.
- Details about the security deposit.
- Rental rights.
- Obligations of both parties.
Lease Agreements Details
Don’t forget that lease agreements often contain specific details to help clear up confusion about many common scenarios. It’s also common for standard rental lease agreements to include the following information:
- Signing incentives or concessions that may be offered to the tenant to entice them to rent.
- Free-rent for a fixed amount of time (such as for one month) to entice the renter.
- Offering discounted rates for signing the full duration lease.
- Property improvements such as new appliances or new flooring.
- Rent-to-own or if there is an option to purchase the property.
- Lease renewal options.
- Available methods for lease dispute resolution such as mediation and/or arbitration.
It’s standard for comprehensive lease agreements to offer more options and legal protections than a standard rental lease agreement would.
Specific Points in the Lease Agreements
Comprehensive lease agreements often specify the following information:
- A third party agrees to cover the tenant’s financial obligations if they happen to default on their rent. This is referred to as a guarantor and it is often a friend, parent, or close relative.
- Any necessary pet fees or deposits.
- Appointed property managers that can act on behalf of the landlord.
- A description of the furnishings, if applicable.
- Whether a tenant can run a home business on the rented property.
Everyone can benefit from a rental lease agreement. They are a simple tool to help both tenants and landlords avoid frustrating disputes in the future. In addition, rental lease agreements are a way to explain the landlord’s responsibilities and outline the rules that the tenant should follow while they’re living on the property.
It’s possible that different organizations and individuals need to use a rental lease agreement. Here are some common scenarios.
- Homeowners who are searching for tenants.
- Tenants who are looking for a new place to live or for a commercial property rental.
- Property managers.
- Small businesses who want to elevate their brick and mortar presence.
- Property owners who want to rent their property to a friend or family member.
If you want to rent a property of any kind, whether it is a singular room or an entire home, you could benefit from using a rental lease agreement. If you don’t, it’s possible for the landlord to:
- Lose rent money.
- Pay penalties for unpaid utility costs.
- Be held liable for any illegal activities that the tenant engages in on the property.
- Spend a significant amount of money to fix repairs or property damage.
The type of leasing agreement that you need depends on your situation. Maybe you just moved to a new city and you’re searching for a home. In this case, you could consider a month-to-month lease while you get acclimated. If you’re looking for a fixed-term lease, this is a great option if you know you aren’t ready to purchase property yet. Make sure to contact our team if you need assistance with the type of lease agreement that you need!
While it’s possible to draft a lease agreement on your own and take it to a lawyer for review, the easiest way is to get in touch with our experts at 33 Realty. Regardless of the type of lease that you need, whether it be short-term, a sublease, a land lease, or any other type of lease, we have the experience and knowledge to assist you! Make sure to explore all of our offerings and contact us today to get started!