According to IBISWorld’s market report on the rental and leasing industry, the sector’s revenue reached $1.1 trillion in 2020 in the United States. The industry contributed over 500 million jobs all over the country. This comes with no surprise as the number of people who rely on leasing or renting properties has increased for the past years. As a private landlord or an agency handling this kind of transaction, you need a reliable private lease agreement to help you. This agreement helps you settle various leasing matters with a client to make way for a successful and productive landlord-tenant partnership.
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What Is a Private Lease Agreement?
A private lease agreement is an agreement that states the different responsibilities of a landlord and tenant with regards to the latter’s use of a property. This business agreement discusses the policies that the tenant should, the payment obligations, the term of the tenancy, and other related concerns regarding their transaction. This is an important document to ensure that every party understands its role in the agreement.
Why Are Lease Agreement Necessary
According to Statista, there are over 43 million rented housing units as of 2019 in the US. The number has been steadily increasing since 1975. This shows that there’s a growing preference for occupying a leased space in the country. This also means that more people are engaging in a transaction with a landlord or a leasing agency. This is where leasing agreements come into play. Here are some reasons why lease agreements are necessary:
1. It protects the parties’ interests. Because it’s a binding document, any compilations that inflict harm on the tenant or the landlord may have legal consequences. This makes all the stated responsibilities on the contract legally applicable.
2. It provides methods to resolve conflict. Among the purpose of an agreement is to propose ways on how to resolve a conflict without taking drastic measures. It can provide ways on how the parties can smoothen out their conflict and proceed back to business without complications.
3. It can serve as a reference to all inquiries. When you have a well-made and complete lease agreement that provides every detail about the lease, this can be a valuable reference in the future. If you’re a tenant, you’ll know what to do when you need to leave for a while or planning to pay the lease a bit later than necessary. As a property manager or owner, you’ll know what responsibilities you have for your tenants and what policy they need to adhere to when using your property.
How to Make a Private Lease Agreement
Here are some helpful tips when making a private lease agreement:
1. Know the State Laws
When you begin to draft your lease agreement, do your research regarding your state’s laws on real estate leasing and other related matters. This is an important element of your document because it serves as a binding contract. You and your tenant should have a clear understanding of your property’s rules and how you can comply with the demands of the law. This varies on your state’s regulations, so you need to consider where you’re located. The state laws usually address issues such as rent control and preservation programs.
2. Provide a Property Description
You will want to include a thorough property description on your contract, even though your tenant might have seen it personally and up close. This is also for transparency purposes, as this will include the overall condition of the unit. This will help determine if there are areas of the property that the tenant can’t use. For example, your contract may include the rental house and its extended facilities such as the garden and the pool, but the vacant lot at its back, although its the leasing owner’s property, is off-limits. Be honest about providing a comprehensive description outline of the property because this is what your tenant will agree to sign on the paper.
3. Address the Lease Payment
The payment may be at the top of the most important things you can address in a private lease agreement. You should not only right the lease amount the tenant should pay on a specific payment schedule, but also a full instruction of the procedure. Introduce billing methods. This is where your research on state laws applies as there are regulations regarding the payment. You should also lay out the conditions in case of a late payment deposit, such as late fees or extension periods. Your tenant will have a lot of queries regarding this topic, and your agreement should be able to cater to them all to avoid misunderstandings and complications.
4. Highlight the Policies
Besides state laws, your property should have agency or tenant policies that you’ll expect all your boarders to comply with. This can include curfews, pet rules, smoking ban except on designated areas, disallowing activities that may disturb the neighboring tenants, and absolutely prohibiting illegal activities within the leased premises. These are important concerns that your tenants should know about. Explain how you’ll implement disciplinary actions such as sending a letter of notice or receiving a warning letter. You should also emphasize what actions may put them at risk of contract termination.
What’s the difference between a lease and a rent?
A lease allows a tenant to occupy a property on a specific period, usually up to a 12-month period, where the tenant can apply for an extension. During this period, the landlord isn’t allowed to change the agreement’s content without written notice. On the other hand, rent is a monthly agreement where both can alter the agreement terms every after 30 days.
How much is the average security deposit amount when availing of a leasing or rental property?
The average amount of a security deposit is one to two months worth of the property’s rent.
What are some important matters that you should include when making a lease agreement?
Here are some important matters that you should include when making a lease agreement:
- Whether or not pets are allowed and the accompanying policies
- The landlord’s scope of access in the property
- The limit of the occupants that can stay on the property
- Utility billings
- Rules on subletting
- Which party pays the attorney’s fees in case of a lawsuit
Whether you’re a property owner establishing a business prospect or a tenant looking for a place to stay, a private lease agreement will help you understand what you need to do when dealing with a leased property during transactions. It will also give light to your obligations in carrying out the necessary methods and policies that come with managing a leased property or occupying a rental space. Get your lease agreement template from our collection to make things easier for you. Download now!
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