In order to avoid disputes in the future, both the landlord (lessor) and the tenant (lessee) must sign a contract. It could be impossible for two people to embark on a journey together without agreement. This agreement goes a long way in ensuring that they don’t step on each other’s toes. Read on to find out more about a lease agreement.
What is Lease?
Lease is a contract that states the terms of agreement between and among parties. Especially the terms whereby one party agrees to rent the other party’s property.
It is usually between a landlord and a tenant. Here, the landlord guarantees the tenant’s properties. Whereas the tenant guarantees the landlord prompt payments for a period. However, consequences await both the landlord and tenant, if they cannot keep to the terms of their contract.
What should I understand about Lease?
Apart from the spheres of landlord and tenant. Overall, it is a legal contract that directs the terms of agreements. And these pertain to rental agreements in real estate and personal property.
In the lease contract, each party learns their duties in order to maintain their agreements. And also to entire it if need be, should any of them default.
What are the things a residential property includes?
In property agreements, there are several items they carry. But the following are what a residential property lease includes.
- Address of the property
- Landlord responsibilities
- Tenant responsibilities
- The rent amount
- Security deposit
- Rent due date
- Consequences for breach of contract
- Duration of the lease
- Pet policies, etc.
They do not design all leases the same way. The most important thing is that both the owner of the property (landlord) and the tenant must have an agreement. And this should occur before the tenant occupies the property.
But for commercial lease, they usually negotiate it according to a specific lessee (tenant). And this could run from 1 to 10 years and could also have longer and complex lease agreements.
Having this in mind, both the landlord and tenant, because of necessity, must possess a copy of the lease. This will help them whenever disputes arise.
How do I break a Lease?
At some point, having endured so much and you need a breath of fresh air. Breaking out of a lease could be what you’re looking at. That’s especially if you have a better property to lease or if you have purchased your own house. However, some consequences could await you just as you break it. These consequences could be mild or even catastrophic. But this depends on the circumstances under which you broke the lease.
If a tenant breaks a lease without negotiating it ahead of time with the landlord. Such a tenant could face a civil lawsuit and have a negative remark on his or her credit report. Because of this, the tenant might have difficulty in renting a new residence.
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However, if you need to break your lease, seek legal counsel or negotiate with your landlord. Breaking this agreement sometimes wouldn’t mean much to the landlord. Especially when they already have a new tenant who can replace you. Because of this, you won’t have to worry about any consequence. Some leases have early termination clauses in them. This allows tenants to end their contracts when their landlord defaults the contractual obligations.
What are 4 common types of leases?
There are so many types, however, we will only look at 4 of them.
The following are the most common types of leases:
1. Absolute Net Lease
This type of lease typically works in single-tenant systems. Where the landlord builds the house to suit the tenant’s needs. And the tenant takes care of all the burdens, which include insurance, taxes, and maintenance. Therefore, the tenants are usually large businesses who know what the term is all about. And because of this, the landlord usually demands low monthly rates.
2. Triple Net Lease
There are three expense categories that come with this type of lease. They are; maintenance, insurance, and real property taxes. The landlord usually passes these expenses to the tenant as rent excesses. So they also call it a ‘pass-through or operating lease.’ In this type, the tenants contribute money for the maintenance of the building.
3. Modified Gross Lease
Here, the landlord bears all the burdens alone. Including payment of all the taxes, maintenance and insurance that are within the terms. Except for interior maintenance costs, utility and so on the tenants will cater for. However, the landlord is usually responsible for expenses regarding roof and other structural aspects of the building. And because of this, the monthly rates are higher when you compare it to other types.
4. Full Service Lease
In this type of lease, the full service lease takes care of the cost of operating a building. Except for data and telephone costs, whereas the landlord will care for the rest. Which includes; taxes, interior, insurance, utility, maintenance and costs for the janitors. And because of this, the monthly rate will be slightly high. This is usually the case where you can’t partition the building into smaller spaces. Many people prefer this type because they can decide how they would like the building to look.
Lease ensures that both the landlord and the tenant have an agreement they must follow to avoid misunderstanding in the future. And because of this, types of leases above will help you know the one you’d prefer. Ensure you keep to the terms of the lease you sign with your landlord. This will save you some consequences which could also affect your credit score.