Elements of the Lease Agreement

Leases can be intimidating to prospective residents and difficult administratively for managers and leasing agents. Nevertheless, they are a necessary part of the rental process. With that in mind, knowing what the elements of the lease are and understanding the purpose of the elements is an important part of the rental management process.

Element #1 - Parties to the Agreement

The lease contract will identify the owner, the management company if there is one, and then the lessor. The identification will the formal legal name of each and their address.

Element #2 - identification of the Premises

This will include the name, address, phone number, and zip code of the property and the unit assigned to the lessor (the resident executing the lease).

Element #3 - Rent

This will describe the amount of the rent, when the rent is due, and when the rent becomes late. This will also outline the specific payment terms if the rent is late.

Element #4 - Term

This section will include the beginning date of the lease, when the lease will expire, and the terms if the resident does not vacate at the term. Often times, the rate will convert to a month to month amount at an increased price. This section also will describe the requirements for termination, results if the resident must terminate early, and other relevant requirements.

Element #5 - Acknowledgment of Security Deposit

The lease describes the amount of the security deposit being held and the requirements for the refunding the deposit. The lessor's legal rights to the deposit amount and the disposition of any interest earned on the security deposit. Normally, security deposit does not draw any interest. Also, the lease will explain the requirement to return the deposit and in what time frame.

Element #5 - Special Clauses and Addendums

These often include items like death clauses, military member rights, home purchase clauses, loss of employment clauses, pet addendums and alternative service items. Other clauses include, condition of premises, use clauses, subleasing clauses, limitations, repair and break down, eviction, right of re-entry, repossession, abandonment, waivers, exculpation, assignment, subordination, fire and casualty, bankruptcy, rules and regulations, condemnation and eminent domain. Also, arbitration and indemnification may be included.

Your typical lease agreement will include the 5 elements listed above. The object of these clauses are to protect the property, the owner, the manager, and the renter. However, because the lease is prepared on the owners behalf the owner is the favored party in most leases. Owners are well advised to use a professionally prepared legally binding lease contract.

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