You Need A Lease Agreement. Tenant or Landlord!

Most of us are living in rented space either as individuals (lonely too) or as families. A smaller slice of the pie are fortunate enough to be landlords. Rental places are usually found through real estate agents, friends and family and through the internet like all modern services. A quick sample survey amongst a group of 30 young people found that, approximately 97% reside in rented accommodation. Such living arrangements are what form the bulk of urban dwelling and they fall under leasehold tenure which we previously discussed here. Recall that this form of tenure must be secured via a written contract – a lease agreement.

Let’s talk about that for a minute. Here’s what you will find:

• The purpose of a lease agreement
• The parties involved in signing
• Main features of the document
• Tricky clauses included in leases
• Protection for the tenant
• Protection for the landlord
• Quick stats from our short survey

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The Purpose

In quick form, a lease agreement is a legally-binding written and signed contract used when a landlord (the “lessor”) rents out a property to a tenant (the “lessee”). This agreement states the valid time period, purpose for which the property shall be used by the tenant and how they shall use it. In most cases a lease is long-term usually one year. Shorter periods are usually bound by rental agreements which facilitate month-to-month stays. In the sample survey, about 40% of young renters reported to not having lease agreements with their landlords.

An accurate description of the property is written in the contract, including the complete address and type of property such as cottage or apartment. If the rental includes assigned parking space, the lease can include the bay number.

So who is involved in this?

Obviously the landlord and the tenant are involved. However, it is imperative to have all the adult occupants write down their names and sign the lease agreement as well. This gives the landlord additional insurance as each adult can be made legally responsible for following all the terms of the lease. Also, if one tenant violates the lease, the landlord has the right to terminate the tenancy of all the occupants. There’s usually an independent third party involved in the signing of the lease. They serve either as witnesses or as enforcers of the lease such as estate agents, police and lawyers.

The Moolah

One important thing that is spelled out in the agreement should be the rental cost to be paid by the tenant over the stipulated period of time. Here the advantage is that the rent cannot be changed during the valid period. For the landlord it presents a stable and predictable income. The rent is not only written down but it is comprehensively indicated how it shall be paid (acceptable payment methods), when it shall be paid, the latest acceptable date of payment, late fees or interest on delayed payments as well.

A security deposit is normally required when one moves into the new place. This clause should include the amount of security deposit collected which is usually equivalent to one month’s rental, the reasons deductions can be taken from the deposit and procedures for returning the security deposit. It is a leash for the tenant and safeguards the landlord in case of serious property damage or late rental payment. If there’s no breach of lease conditions, the deposit is returned to the tenant when they move out.

If the lease agreement was prepared and is to be enforced by a lawyer costs may be involved. They are usually covered by the landlord but in some instances they’re split between both parties.

Some Tricky Clauses

Pertaining to the responsibilities of the landlord-tenant relationship, comes the issue of maintaining and repairing the property which should be explicitly shown in the contract. The landlord is responsible for maintaining the fixed assets affecting the liveability of the property such as plumbing, power supply and other dangerous conditions. Rental cost and property conditions are directly proportional. However from our survey, about 30% feel that they’re being overcharged. This is called “Implied Warranty of Habitability” whereby the landlord impliedly promises that rented residential premises are fit for human habitation and are free from substantial defects.

Tenants have specific responsibilities to maintain the rental property’s liveability as they found it in without causing any damage, keeping it free from safety or sanitary hazards and following all building and housing codes. Some minor repairs occurring under day to day inconveniences e.g. fixing a broken light switch should be done by the tenant. Anything caused by neglect or abuse by a tenant should be paid for by the tenant. Failure to uphold the terms spelt out under the clause results in the landlord withholding a proportional amount of the security deposit mentioned earlier.

Most young adults choose to share apartments in town to navigate the unbearable rental costs. Let’s be clear about this. Most lease agreements do not allow for subletting or subleasing without the written consent of the landlord, and sharing is exactly that. Having one name on the rental contract means that – legally – that one person is solely responsible for all payments and damages. Even after you move out, things such as backdated utility bills can arise. The best way to traverse this challenge is to be upfront the first time and have all the adult sharing parties sign the lease with the landlord’s greenlight on how you intend to live. Sharing without approval will lead to legal trouble and penalties including eviction.

Speaking of eviction, it is extremely important to understand your rights as a tenant by knowing local laws for eviction conditions and other types of notices. Common causes for eviction are when the tenant has conducted illegal activities on the property, violated the lease terms, causing severe damage to the property. All other reasons will require both parties to adhere to the terms of the contract. Notice period is stipulated in the lease and is usually 30 days for most conditions.

Another tricky clause is to do with utilities, both the regulations of use and the payments to the providers. It is common for tenants to overuse utilities such as water and power when they do not have to pay for them, that is, when covered by rental cost. Conversely, a significant number of landlords have been known to notoriously overcharge their tenants for utilities in cases where they live on the same property and have to share pre-paid electricity for example. A solution is installing split metering. Where split metering for utilities cannot be done, everything must be deliberately spelled out either in the lease agreement itself or in a separate landlord-tenant utilities agreement addendum clearly detailing how the bills are split and the regulations to prevent overuse. The most balanced condition for both parties is to separate utility bills from rent so that the tenant rightfully pays for what they use.

Ever heard of guest clauses? They usually protect the physical property and the landlord more by making sure there’s a strong occupancy clause that not only specifies how many people will reside in the unit, but also restrict overnight guests to a specific (very low) number of nights each month. It may be in the form of, “Tenant is responsible for the actions, liabilities or damage created by any and all occupants, guests and invitees.” The biggest cause of wear and tear on any property is people so more people using the property means more damage. This is very useful for the landlord, and tenants should be wary of such.

Since the landlord owns the place, they’re permitted to enter at any time right? Nope. Respecting a tenant’s right to “quiet enjoyment” i.e. living without disturbances is mandatory. To avoid tenant claims of illegal entry or violation of privacy rights, most leases contain “right of entry” clauses that specify how much notice must be given and how regular the landlord or property manager can come in for routine inspections or repairs. This clause is in greater favour of the tenant, thus make sure it is on your lease.

Conclusion

The lease agreement form protects both the landlord and the tenant. It also ensures that both parties respect each other’s rights and perform their responsibilities without falling short. This contract works well in cases of conflict where resolution requires a show of evidence of wrongdoing. On your next or current residence make efforts to gain a written lease protecting your living conditions. You’ll thank the heavens later!

PS: An edit with more stats from that sample survey will be coming soon. Some interesting results coming your way.