As pointed out in the lead article, a lease is a contract that allows a tenant to occupy a property for a specified period of time, at an agreed-upon rent, as long as the terms of the lease are followed. Does that benefit the landlord? Or is it only a benefit to the tenant?
A lease differs from a rental agreement in that a rental agreement is usually only month-to-month, and allows termination by either party on a specific notice, 7, 10, 14 20, or 30 days, depending on the state.
A written agreement is always in the best interest of both the landlord and the tenant. It is in their mutual interest because it spells out exactly what is expected of both parties and the mechanism for changing and terminating the agreement.
In fact a lease is simply a rental agreement with a term longer than a month.
What we will look at here is the pros and cons of using a lease rather than a rental agreement.
You are “guaranteed” a tenant and rent for the term of the lease
That is what you hope against hope, and that is one of the principal reasons that landlords use a lease rather than rent month-to-month. However the reality is often different. Property managers in different areas tell me as many as 50 percent of tenants move before the end of the lease.
Of course your ex-tenants don’t want to pay rent on the place they just moved out of, in spite of the fact that the lease they agreed to states specifically that they are required to pay the agreed-upon rental amount until the expiration of the lease or until you re-rent the property. They will try to get out of paying double rent with any number of specious ploys, including claiming that the unit was “un-inhabitable” because you refused to make repairs to the damage they deliberately did to the unit.
So You Have a Contract?
Case 1
I have a tenant who recently signed a 12 month lease, they wrote me a letter with their rent payment saying they will be breaking the lease and moving at the end of October, they cited that because the basement leaked water (which I addressed the day they called) they were leaving. The lease does not legally end until August 31, 2003. The lease does not have a provision for the tenant to break the lease early. Do I sue? Is this an open and shut case? Thank You. Jack
Case 2
My lease is up April 30th but we have to move out sooner because we bought a house. We can be out by December 1st. Do I have to pay for the rest of the lease, or is 60 days notice enough by law?
Case 3
My fiancée and I just recently closed on our house, and are in the process of moving out of our apartment. Our apartment managers state that the purchase of a home does not suffice for the breaking of a rental agreement in which we have 3 months left. We were wondering if the apartment complex has any right to hold us accountable for these months for purchasing a home. As most people know, purchasing a home can take weeks and sometimes months, and we could not predict the amount of time needed to complete this sale. In this case, it took less time than the six-month contract we signed. However, there were no addendums to the original contract about the purchase of a home.
Our options now are to pay the last 3 months for the apartment, as well as the new mortgage payment on our house. Pay this next month and turn in a 30 day notice, at which point they will then charge us 3 months’ rent for breaking the lease.
We are just unsure of what our rights are, and if we are liable for the remaining months or charges for breaking the lease contract. In addition, as long as it is drawn properly, a lease contract is enforceable in court, if it comes to that.
Also, if the tenant moves out of the area of your rental, such as to another state, you are in for a monumental task collecting the rent owed you.
Tenants will say they want to make sure you will not “sell the property out from under them,” or raise the rent. Not bad reasons on their part, but certainly no protection or guarantee for you.
Section 8 requires a lease. That fact should be a dead giveaway that leases are not in favor of the landlord, since the Section 8 program is designed to help tenants, not rental property owners.
Meticulous tenant selection and huge deposits are the surest ways to keep from having a tenant bail in the middle of a lease, leaving you high and dry.
You have a contract
This reason has considerable merit, as long as the tenant understands that a lease is a contract. It spells out responsibilities, as well as beginning and ending dates of the lease, and states exactly how much money is to be paid you as landlord. There is a determining effect on people when they affix their signatures to a contract.
One way to make a leasing tenant understand the rent they owe is to specify not only the monthly rent, but also the total amount of the rent for the period of the lease. For example,
“Tenant to pay $6,000 in rent, payable in monthly installments of $500 or more”
Responsibilities spelled out
That goes part and parcel with the contract. However, responsibilities can be spelled out just as well in a rental agreement as in a lease. As pointed out above, the advantage for both parties is that both landlord and tenant understand fully their rights and responsibilities.
Could be an impediment to sale
A lease goes with a property. So if you have a lease and you sell your rental property, the new owner has to honor the lease or buy out the lessee. Not a problem if you are selling investment properties, such as multi-unit buildings. But if you are selling a single-family home, it could cut the number of potential buyers by two-thirds or more. Buyers of single-family homes usually want to live in them, not rent them out. A lease will keep them from doing that until the term of the lease expires. Then they still have to deal with getting the tenant to move.
When you always want to use a lease
Some localities, such as Seattle, have laws that require that landlords have “just cause” to terminate a tenancy. Tenants, on the other hand, can move out, with proper notice, anytime they please. Ordinances such as these tip the scales heavily in favor of the tenant. A lease can balance the scales back toward the landlord. If a tenant is obligated to live in the property for the period of the lease, you have taken away a tenant advantage. Another advantage to you is that the law that requires “just cause” to terminate a tenancy may include as “cause” the expiration of a lease.
If you are going to use a lease, or if the tenant insists on a lease, you need to ask and verify the answers to the following questions:
1. Have you ever moved out before the expiration of a lease?
2. Have you ever had a lease terminated for cause?
Think hard and prepare properly before you agree to rent your property using a lease. They can work for you if handled with open eyes and careful procedures.
