What You Need to Know About Rental Lease Agreements

It’s important that rental agreements that protect both the property owner and the renter are in place. andia/Shutterstock

Renter households are increasing. In the second quarter of 2024, year over year, the share of American renters grew by 1.9 percent, with renters making up 34.4 percent of households knowing about rental or lease agreements is imperative.

With all these renters, it’s important to have rental agreements that protect both the property owner and the renter. Knowing what to expect from a rental agreement or lease can save a lot of problems when you go to move or have a disagreement.

Rental Agreement Versus Lease

A rental agreement and a lease are two different documents. A rental agreement is a short-term contract, while a lease is a long-term contract.

In a rental agreement, the parties are described as landlord and tenant. However, with a lease agreement, the parties are usually called lessor (the owner) and lessee (the renter).

A rental agreement usually lasts for only 30 days. Once the 30 days are up, the property owner can change the amount of rent charged. The renter has the option to leave.

A lease can last anywhere from six months to a year. There are some that last longer. For example, retailers often have leases that have multiple years.

As the renter, whatever contract you choose depends on your circumstances. For example, someone moving to a new city may want a short-term contract or rental agreement instead of a long-term one. This person might just need a temporary place while searching for a house to buy.

Regardless of the circumstances, both parties can end the agreement after 30 days or whatever amount of time they have agreed to.

Someone who is going to be in the same place for a while may want a long-term contract or lease. This is especially true if the renter wants a guarantee that their rent won’t go up every month because the lease locks in the rent for the length of the contract. If that’s a year, then the monthly rate will remain the same for that year.

Leases and Rental Agreements Include Similar Language

There is specific information that both a rental agreement and a lease have. The first and most basic are the names of the property owner and tenant or lessee.

Other elements of the contract include:

• the property’s address
• the terms of the rental
• the amount to be paid
• stipulations for a security deposit, parking, or storage space
• the number of people at the property
• whether pets are allowed
• whether the property owner has access to the property
• who pays legal fees during a dispute

A rental agreement or lease is a legal document and is binding. If it’s a month-to-month rental agreement, each party must give the other notice if they don’t want to renew. Otherwise, long-term leases require legal action to end.

Some tenants may need a guarantor who’ll be legally responsible for payments and penalties. This is usually the case with students.

Pets may be allowed—but read the contract. Some property owners will welcome only certain pets. There are breeds such as pit bulls and rottweillers that are banned from rentals.

If you’re a freelancer, ensure you'll be able to run your business in your rental. Some owners restrict that activity.

Be Clear About Rent Payments

You want to be clear about what you will owe. The rental agreement or lease should provide a detailed breakdown of the rent amount, when the rent is due, and what would be the consequences of late payments.

Check to see what other benefits the rental contract has. For example, utilities like electricity and water are included. Some rentals will consist of this but not include internet access. If you must pay extras, that will inflate your living costs.

If there’s a pool or gym, do you have to pay a yearly service fee? The bottom line is to know exactly what your rent costs and what it entails.

Also, take note of any deposits. There will probably be a main deposit on the rental, which could be one to two months. But some property owners will require a deposit for pets.

Rights of Renters

Everything expected of you as a tenant or lessee should be in the rental contract. But your rights as a tenant should also be in the rental contract. Some of these include:

• that the property be ready and available at the start of the contract
• that the property is in livable condition
• that the property is handed over and accepted in person
• that property owners must make necessary repairs
• that tenants must receive notification before the property owner can enter
• that tenant must be given a reason to vacate within sufficient time

Although these are rights, the tenant does have some duties. They must pay their rent on time and adhere to all the rules. The tenant must also give a valid reason and advance notification to stop paying rent and leave the property. All damage to the property must be reimbursed.

Rights of Property Owners

Landlords or lessors have rights, too. They are allowed to protect their real estate income.

A property owner can evict a renter before the end of the contract’s term if they have cause. For example, nonpayment of rent is a good cause of eviction. But owners must follow the legal process for the property’s local government or state.

Rental Agreements and Leases Are Legal

When you sign a rental agreement or lease, you enter into a legally binding contract. Besides the stated rent payments, there may be some hidden fees or restrictions.

Ensure you read it carefully and understand what is expected of you.

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