A lease is a contractual agreement between a landlord (the property owner or lessor) and a tenant (the renter or lessee) granting the tenant the right to use the property for a specified period in exchange for periodic payments, typically called rent. We’ll answer, “What does lease mean?” to help you grow your real estate knowledge.
What Does Lease Mean?
The word lease can be used as a noun and a verb. As a noun, a lease is a contract between a landlord and a tenant. As a verb, lease means to grant the temporary possession or use of a property. So, one can sign a lease or lease an apartment to a friend.
What Is the Purpose of a Lease?
Leases outline the terms and conditions under which the property is rented, including the duration of the lease, the amount of rent, responsibilities of both parties regarding maintenance and repairs, restrictions on use, and other provisions relevant to the rental agreement.
What Are the Sections of a Lease?
A lease typically consists of several key sections that outline the different aspects of the rental agreement. Here are the parts of a lease.
1. Title or Introduction
A lease document typically has the title “Residential Lease Agreement” or “Commercial Lease Agreement” along with the parties’ names.
2. Parties to the lease
In this part of the lease, the landlord and tenant are named by their full legal names and addresses.
3. Description of the property
A detailed description of the property includes its address, unit number, and any specific features or amenities.
4. Terms of the lease
The duration of the lease is outlined in this section. It may also include provisions for renewal or termination of the lease.
5. Rent payment details
The renter is given details about the amount of rent due and the acceptable payment methods in this lease section. Late fees for late rent payments may also be outlined in this section.
6. Security deposit
This part specifies the amount of the security deposit required. In this section, the renter is informed of reasons why the security deposit might be withheld – and the procedures for its return at the end of the lease term.
7. Utilities and services
The property owner may include some utilities or services in the rent. However, some may be the tenant’s responsibility. This section will outline these responsibilities.
8. Use of the property
This part of a lease outlines how a tenant is permitted to use the property, any restrictions on use, and any rules the tenant must follow.
9. Maintenance and repairs
This section specifies the landlord and tenant’s responsibilities regarding the property’s maintenance and repairs. It typically outlines who is responsible for maintaining different parts of the property and how repairs will be handled.
10. Insurance and liability
This part of the lease may include provisions related to insurance requirements for the tenant and liability for damages or injuries that occur on the property.
11. Entry and inspection
This section outlines the landlord’s rights to enter the property for maintenance, repairs, or inspections and the procedures and notice requirements for entry.
12. Termination and renewal
This part specifies the conditions under which the lease may be terminated early by either party and any lease renewal or extension provisions.
13. Miscellaneous provisions
This section may include any additional clauses or provisions relevant to the specific lease agreement, such as policies regarding pets or parking.
The lease must be signed and dated by a landlord and tenant.
Types of Leases
Leases can be used for residential and commercial properties and vary in length. Regardless, a lease serves as a legally binding document that protects the rights and obligations of both landlords and tenants.
Here are some of the most common types of leases.
1. Fixed-term lease
A term lease has a specific start and end date. Its duration is predetermined and does not change unless both parties agree to renew or terminate it early.
2. Month-to-month lease
In this type of lease, the tenancy continues month-to-month, with rent typically due at the beginning of each month. This arrangement offers flexibility for landlords and tenants, as either party can terminate the lease with proper notice.
3. Commercial lease
Commercial leases are used to rent commercial properties, such as retail stores, office spaces, or industrial warehouses. These leases often have longer terms than residential leases and may include provisions specific to a business’s needs.
4. Residential lease
Residential leases are used for apartments, houses, and condos. They outline occupancy rules, maintenance responsibilities, and more.
5. Percentage lease
A percentage lease, commonly used in retail spaces, requires the tenant to pay a base rent plus a percentage of their gross sales. This type of lease is often used in shopping malls.
A sublease occurs when a tenant rents out all or part of the property to another party. In a sublease, the original tenant retains primary responsibility for the leased apartment with the landlord, including payment of rent and adherence to lease terms.
You may encounter other types of lease, such as a “gross” or “net” lease. A ground lease often has durations spanning several decades.
This is a high-level view of rental leases. However, when you go through the pre-licensing process to become a real estate agent, you will learn more about leases and other real estate contracts. Make sure your pre-licensing education goes smoothly by working with Colibri Real Estate.
Our experienced instructors have helped thousands earn real estate licenses by offering clear, easy-to-understand explanations of complex topics. Learn more about becoming a real estate agent in your state, and then sign up for your real estate licensing course with Colibri Real Estate.