Residential Lease Agreements
Most of us have encountered a residential lease agreement at some point in our lives. Taking the time to understand these agreements can be essential to ensuring your rights—and the rights of others—aren’t infringed upon. Below, we answer some of the most common questions about residential leases to help no matter your situation.
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Understanding Residential Lease Agreements:
What is a Residential Lease Agreement?
A residential lease agreement is a contract between a landlord and a tenant. Both the landlord and tenant (aka lessor and lessee) are identified in the lease and need to sign it.
A lease agreement dictates the terms of a rental arrangement, including how much rent is and when it’s due, who is responsible for paying utilities, the lease’s end date, and what happens if the lease is broken.
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Types of Residential Leases
There are several types of residential property leases. The type of lease will determine some important elements of the agreement.
What are the different types of residential leases?
The main differences between types of residential leases have to do with duration and who the agreement is between. Some of the below options are technically “rental agreements” as opposed to lease agreements, but they serve the same purpose: to dictate the terms of a residential rental arrangement.
- Fixed Term
Fixed term leases allow a tenant to rent a residential property for a specific period of time at a set price. Fixed term leases tend to be longer term, generally lasting for a year or more. Since the lease is in place for a certain length of time, there is likely a penalty if the tenant terminates the lease early, as determined by the terms of the lease agreement. - Month-to-Month
Also called periodic leases (and technically labeled as “rental agreements” rather than “lease agreements”), month-to-month leases renew automatically and can be canceled at any time by the landlord or tenant, so long as sufficient notice is supplied. The landlord can also change the cost of rent at their discretion (again, with sufficient notice). The agreement itself, and/or state law, will determine how much notice is sufficient. - Subleases
With a sublease agreement, the original tenant rents out their room/property to a third party. Rather than the contract being between the tenant and landlord, a sublease agreement is generally between the tenant and the new third-party renter. The original renter will still be on the hook for any missed rent or property damages. Note that not all lease agreements allow for subleases—some may explicitly prohibit them.
Contents of a Residential Lease Agreement
The contents of residential lease agreements vary, though there are numerous terms that most leases speak to. States and cities often have statutes that regulate some lease terms. Whether you’re a lessor or a lessee, make sure you’re caught up on your state’s current laws to ensure your lease—and any enforcement thereof—doesn’t infringe upon renters’ rights.
- Names of tenants
Names of all tenants should be included. Only the tenants named in the lease are subject to the terms of the lease. - Rent amount and due dates
How much is rent and when is it due? Some leases will specify a grace period during which rent can be paid past the due date without incurring a late fee. For example, if rent is due on the first of the month, the lease might state that payment can be made until the 4th of the month without penalty. The lease should also state what forms of payment are acceptable, such as a mailed check or payment portal. - Duration
The lease’s duration must be specified in the agreement. In a fixed term residential lease, duration is typically 6 months to two years, though other lengths of time can be specified. In a month-to-month rental agreement, the terms typically auto-renew each month until terminated by lessor or lessee. - Utilities
The lease needs to say who pays for which utilities. For example, the landlord may pay for garbage and water, but the tenant pays for electrical and WiFi. - Security deposit
If a security deposit is due prior to move-in, the amount owed needs to be listed in the lease. Additionally, the terms of the deposit must be outlined, such as if a certain amount of the deposit will automatically be withheld for carpet cleaning or floor waxing. - Activity restrictions
Any activities that are restricted on the rental property need to be listed. For example, if smoking is prohibited the lease needs to say so. A clause may also be included that prohibits illegal activity on the property. - Pets
The lease agreement should say whether or not pets are allowed. If only certain kinds of pets are allowed, such as dogs under 20 pounds or only cats, that should be stated. Any pet fees, like additional rent or a pet deposit, must also be detailed. - Occupancy limits
Is there a limit on the number of people who can live at the rental property? If so, the lease needs to spell that out. Any rules around subleases should be described as well, such as if written permission is needed from the landlord or if the subletter needs to pass a background check. - Repairs
The process for how repairs and maintenance are handled—and by whom—should be described in the lease agreement. Most fixed-term leases stipulate that the lessor will be responsible for regular repairs and maintenance. - Landlord entry into unit/property
State laws usually require landlords to provide tenants with notice prior to entering the property. The lease should detail how much notice tenants will be provided with. This is especially important, as it’s illegal for landlords to enter rental properties without providing the proper notice. - Breaking the lease
Breaking the lease may include early termination or a violation of other lease terms. The process for what happens if the tenant breaks the lease should be specified. For example, if a 1-year lease is signed, but the tenant decides to leave early, the lease may say that the tenant will forfeit their security deposit and a month of rent.
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The laws that govern landlords and tenants vary widely from state to state, city to city, and can change in accordance with current events. There are also federal laws that govern rental housing, and these too can change with the times. No matter what side of the rental coin you’re on, it’s essential to understand the basics of how rental housing laws impact landlords, renters, and applicants.
Federal Rental Housing Law
Some of the federal laws that most directly impact lessors and lessees include the Fair Housing Act and the Fair Credit Reporting Act.
The Fair Housing Act makes it “illegal to discriminate in the sale or rental of housing … because of race, color, national origin, religion, sex, familial status, and disability.”
The Fair Credit Reporting Act “protects information collected by consumer reporting agencies” including tenant screening services. Because of this Act, if a landlord uses a consumer report during the screening process (which might compile information such as rental history, credit report, and criminal records), they are required to tell the applicant if they’ve been rejected due to information found on the report. The applicant must also be informed if other actions are taken as a result of the report, such as a raise in rent or the requirement of a co-signer. In these cases, the Federal Trade Commission recommends providing applicants a written adverse action notice.
State Rental Housing Law
State statutes can dictate much about a residential lease, from security deposits to evictions to landlord/tenant rights and responsibilities. (Rights and responsibilities include things like keeping the property clean and safe.)
Regarding security deposits, state statutes provide various rules and restrictions. For example, Ohio has no limit on how much a landlord can charge for security deposits, but typically requires landlords to pay 5% interest on a tenants’ deposits. In Arizona, no interest is charged but security deposits cannot be more than 1.5 month’s rent.
State statutes can also govern rules around evictions due to unpaid rent, such as how long the tenant has to pay or move before being evicted, and how long the landlord has to wait to give notice of potential eviction. In Georgia, for example, rent can be demanded the second it’s due, eviction can be filed for immediately upon non-payment, and the tenant has 7 days to pay. In New York, written notice must be sent to tenants whose rent is five days late; they then have 14 days to pay.
Crisis-Centered Rental Housing Law
Rental housing laws can be impacted by specific situations, especially in times of crisis. For example, the COVID-19 crisis prompted a temporary eviction moratorium at the federal level—applying to all states—that prohibited evicting residential renters, even in cases of unpaid rent.
Crisis-prompted rental housing regulations can also occur locally, though they do not always benefit renters. Not long after Hurricane Katrina, St. Bernard Parish (near downtown New Orleans) passed an ordinance stating single family homes could only be rented to “blood relatives” of the landlord to “preserve the integrity of established neighborhoods.” Violations of the ordinance came with fines up to $250 per day.
As detailed in a Nova Law Review article, a lawsuit was quickly filed against the parish. In part, the lawsuit stated the ordinance violated the Fair Housing Act, as it disproportionately impacted Black and Hispanic communities. (The vast majority of property owners/landlords in the parish were white.) The ordinance was repealed, but the parish instituted other restrictive rental ordinances in its place, prompting further lawsuits and an eventual settlement of over $1 million.
Residential Lease FAQs
What is a co-signer?
A co-signer is a third party who signs a lease in addition to the tenant. The co-signer is responsible for paying rent if the tenant fails to do so. Co-signers are most commonly required in situations where the renter makes under a certain amount of money.
What is eviction?
Eviction is the legal process through which a tenant is forced to vacate the property they live in. Evictions are court-ordered, usually occurring after a tenant has broken the lease in some way. There are steps that must be followed to keep the eviction process legal. The exact steps vary by jurisdiction, but at minimum tenants must be given a certain amount of notice.
What if a tenant doesn’t pay rent?
If a tenant doesn’t pay rent, they may be subject to eviction. But whether or not a renter can be evicted—and what actions must be taken to legally evict—depends on the terms of lease, as well as any applicable city, state, or federal laws.
How much can a landlord deduct from a security deposit?
A landlord may be able to withhold the entire security deposit if they feel they have cause to do so. The lease agreement should stipulate if a certain amount of money will automatically be withheld, and it should also detail what actions need to be taken by the tenant in order to have the deposit returned. Landlords must also make sure they’re in compliance with any applicable city/state laws.
Landlords should keep receipts and detailed records of any repairs made to the property after the tenant vacates. (This may even be legally required in some states.) The same is true for tenants. Take photos of the property after it is cleaned and thoroughly review the lease and any cleaning checklists provided by the landlord to ensure you cover all your bases.
What happens if a landlord breaks a lease?
It depends on why the lease was broken. Landlords typically have grounds to preemptively terminate fixed-term residential leases if the tenant violated some portion of the lease. But if the landlord doesn’t have cause to break the lease, there are few legal options that allow them to terminate a lease early. An exception to this is if an early termination clause is included in the lease. If such a clause is included, the landlord could terminate the lease early as long as sufficient notice is provided.