A lease agreement is an arrangement, made between two parties, that allows one of those parties to use an asset belonging to the owner. Typically, lease agreements are used for rental properties, but they are also used for rentals of vehicles, household appliances, construction equipment, and other items. A lease agreement is a legal contract designed to protect both the person leasing the asset (“lessee”) and the owner of the asset (“lessor”) . To explore this concept, consider the following lease agreement definition.
A lease agreement is a legal contract used when a party conveys land or personal property to another party for a specific amount of time in return for payment. The lease agreement outlines all of the aspects of the lease arrangement so that each party understands his rights and obligations under the lease. Formal lease agreements are legally binding on both parties, and breach of the agreement, or failure to uphold the provisions of the agreement, has legal consequences.
A good example of lease agreement terms pertains to rental property. When John leases a house from David, he signs a lease agreement that specifies the location of the home, the monthly payment amount, the duration of the lease, and any other requirements of the parties, such as a ban on pets. The lease is legally binding, so if John moves out early, he may be held liable to pay for the entire length of the lease, even though he was no longer living there.
Terms commonly included in a lease agreement:
A rental agreement is similar to a lease agreement, but only provides for use of the property for a short period of time. Where a lease agreement for real property, such as a home, is commonly signed for a period of six months to one year or more, a rental agreement is usually only valid for 30 days. At the end of the rental period, the rental agreement automatically renews for the next period. This is known as a month-to-month tenancy. The terms of a lease agreement remain valid for the entire term, but the terms of a rental agreement can be changed by either party with sufficient notice.
If the tenant fails to abide by the terms of his residential lease agreement, the landlord can legally end the lease and evict the tenant. If this occurs, the tenant can be ordered to pay the remaining months on the lease, as well as an additional amount for breaching the lease. If the lease ends under normal circumstances, the tenant must notify the landlord ahead of time of his intent to move out. If he fails to do so, the monthly payments may be automatically renewed on a month-to-month basis, as the landlord cannot simply lease the residence to a new tenant before the old tenant leaves.
A commercial lease agreement is a contract made between a property owner and a business. The commercial lease allows businesses to use rental property, rather than buying property. This has a number of advantages for a variety of business types, the primary of which is a lower amount of cash needed to get started.
Before entering into a commercial lease agreement, the business must ensure the property meets its needs This includes being certain that the location of the property meets the zoning requirements needed to operate a business.
A pre-printed lease agreement form, commonly available in office supply stores, is usually well-suited to residential leases. These forms are basic in nature, allowing a great deal of information to be filled in by the parties to the lease themselves. Even a ready-made lease is a legal contract, so it is important that the parties read carefully to make sure the provisions suit their needs.
Any lease agreement form should include certain information, some of which is required by law, to be enforceable. These laws vary by state. The minimum information that should be included on a lease agreement form includes:
When a tenant is in breach of a lease agreement, the landlord can legally terminate the lease. The most common breach of a lease agreement occurs when a tenant fails to pay rent in a timely manner, though failure to adhere to other provisions of the lease also constitute a breach. Many landlords are willing to work through a variety of problems when it comes to tenants not fulfilling their leases, as this is often less expensive than evicting the tenant and going through the process of obtaining a new tenant. Even when a landlord makes such allowances, or attempts at working out issues, he retains the right to evict the tenant who has breached the lease.
When a lease has been breached by a tenant, the landlord must follow certain steps required by state law to evict the tenant. The first step is giving the tenant written notice specifying how the tenant can cure the breach, if relevant, and the amount of time he is allowed to do so before eviction proceedings will be started. At the end of that time period, if the lease has not been cured, the landlord may file legal eviction proceedings with the local court.
If a tenant believes his landlord is in breach of a lease agreement, he should communicate with the landlord in an attempt to remedy the situation. It is a good idea to communicate in writing to document the situation in case it becomes necessary to take the matter to court. A tenant has the right to file a civil lawsuit against a landlord in breach of their lease.
Example of lease agreement breach:
Lana has a one-year lease on the apartment where she has lived for five months. When her stove, included in the lease, stops working properly, Lana contacts the landlord, asking that it be repaired. The landlord sent a repairman out several days later, though the repairman said the stove simply needs to be replaced, and that he would notify the landlord. Several more days passed with no word from the landlord, despite Lana’s attempts to contact him by phone and text.
Lana, who has been unable to prepare meals for the past two weeks without a stove, decides to move out. She leaves a voicemail message, and sends a text message to her landlord giving him two days notice that she is moving, and asking for her security deposit to be returned. When the landlord refuses to return Lana’s security deposit, which was twice the amount of her monthly rent, Lana files a lawsuit in small claims court.
At the trial, the landlord claims Lana breached the lease, moving out prior to its termination date, and not giving the required 30 days notice prior to moving out. He asks the court to order Lana to pay the remaining seven months rent he is owed on the lease. Because the stove was included on the lease, the landlord is responsible to ensure it remains in working order or replaced.
As this is important to Lana’s ability to live comfortable in her home, and the landlord failed to fix the problem, or even to communicate with Lana once he discovered it would need to be replaced, it is the landlord who breached this lease. Lana has the right to move to a new home, and likely will be found to be entitled to receive a return of her security deposit.
In May 2012, Amiteria Antunez, a tenant under the City of Los Angeles’ Rent Stabilization Ordinance (“LARSO”) program, was served a 3-day notice to pay rent or quit, as well as a 3-day notice to perform covenants or quit. This notice required Amiteria to pay past due rent, and demanded that she obtain renters’ insurance as required by a provision of her lease.
When Amiteria failed to purchase the insurance policy within the 3-day limit, the landlord, NIVO 1 LLC, filed eviction proceedings against her. The landlord’s complaint said Amiteria was in violation of paragraph 17 of her lease agreement, which read:
“INSURANCE: TENANT must maintain a personal property insurance policy to cover any losses sustained to Tenant’s personal property or vehicle.
“It is acknowledged that LANDLORD does not maintain this insurance to cover personal property damage or loss caused by fire, theft, rain, water overflow/leakage, acts of GOD, and/or any other causes. TENANT’S failure to maintain said policy shall be a complete waiver of TENANT’S right to seek damages against LANDLORD.”
Amiteria testified at the trial that she had never purchased renter’s insurance since she moved into the premises fourteen years earlier, in 1998. The trial court decided that failure to obtain insurance was not a material breach, and therefore could not lead to a forfeiture of the lease.
The landlord appealed the decision. The appellate court ruled that the determination of whether a breach of lease agreement is so material that the injured party had cause to terminate the contract is in the hands of the trial court. The trial court in this case deemed Amiteria’s failure to maintain insurance covering her own belongings was a “trivial breach,” because it clearly was meant to benefit her, not the landlord. The appellate court upheld the trial court’s ruling on the matter, in favor of the tenant.
This has become an important decision in classifying which provisions of a lease agreement, if not uphold, would be deemed a “material” breach. A material breach of any contract is a breach of some provision that is so central to the heart of the contract itself that the agreement would be irreparably broken.