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Suzanne De Vita is a senior editor on Bankrate’s Home Lending team, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters.
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Signing a rental lease agreement for the first time can be exciting. However, interpreting these legally binding contracts can be slightly confusing, and what you don’t know can come back to bite you later.
A rental lease agreement is a contract between a landlord and a tenant (or tenants) that allows the tenant to lease or rent the landlord’s property for a specified amount of time, and under certain conditions. Rental lease agreements often refer to the landlord as the “lessor” and the renter or tenant as the “lessee,” and can be used for different property types, such as an apartment or condominium unit.
The lease agreement typically spells out the obligations of both the landlord and the tenant, such as who’s responsible for property maintenance; what changes to the property, if any, the landlord will allow; and how either party can terminate the lease.
It might also include an addition to the agreement itself, sometimes called a rider, that further stipulates terms not specified in the contract. An example of a provision included in a rider might be that the tenant is responsible for plumbing fixes, while the landlord is responsible for HVAC repairs.
If you’ve already weighed the decision to rent vs. buy a home and you’ve chosen to rent, you’ll fill out a rental application and typically undergo a credit and background check. Once you’ve cleared those hurdles, it’s time to sign the rental lease agreement. Before you do, though, it’s important to understand the language in the contract so there are no unpleasant surprises.
Here are some common items you’ll see in a rental lease and what these terms mean.
Many lease agreements are set for one year (sometimes longer or shorter) and your monthly rent amount should be spelled out clearly. The lease should also state any late charges if you don’t pay on time. You might be charged a flat late charge and or an additional daily fee for each day you’re behind on rent.
If there’s any ambiguity on monthly rent or the term of the lease versus what has been communicated verbally, ask the landlord to put these key items into writing, advises Patrick Noonan, coordinator of Edgewater, Colorado-based Colorado Housing Connects, a statewide helpline for tenants and landlords.
“A lease agreement protects the tenant from rent increases in the middle of the lease, so you want that dollar amount clearly stated,” Noonan says, adding that it’s not uncommon for landlords to hike rent when you renew a lease, but some areas may have rent control that caps how much rent can be increased.
Most lease agreements require rent to be paid on the first of the month, but some landlords offer a grace period to turn in your payment.
It’s important to note, though, that a grace period doesn’t necessarily mean you won’t be charged late fees for paying after the first of the month; it just gives you extra time to avoid being considered past due on rent, Noonan says. Read the lease to find out when such fees kick in and work out a way to make sure the landlord receives the rent on time each month.
A security deposit is an upfront payment that protects a landlord’s investment if a tenant damages their property or leaves it in poor condition. It’s common to pay the first and last month’s rent amount as a security deposit. For instance, if your rent is $1,200 per month, you might be expected to pay a $2,400 security deposit as part of your lease agreement, Noonan says. Know that some states and localities have laws that specify the maximum deposit landlords can collect.
The lease agreement should state under what conditions a security deposit will be withheld (painting or carpet cleaning, for example) after your lease is up. Look for a specified deadline by which the landlord must return the deposit and if there’s not one in the agreement, insist on including one before you sign.
Not all landlords allow you to house a pet in the unit, and those that do often charge additional fees for your furry friend. This can include a flat, nonrefundable pet fee or deposit, as well as another monthly charge for “pet rent,” Noonan says, since pets can create wear and tear or mess.
Make sure your lease explains what kind of pets are allowed in the unit, how many, and all fees for each pet. Keep in mind that if pets aren’t allowed or you later add more pets than is allowed, you’ll be in violation of your lease terms.
Beyond the security deposit, application fee and monthly rent and pet fees, a landlord can charge additional fees that take renters by surprise, according to Angela Blanco, a landlord tenant counselor with the City of Phoenix’s Landlord and Tenant Counseling Program.
Some of these charges vary depending on property type, and might include parking fees, utilities, trash service fees, administrative fees for third-party billing services and notice fees (when a landlord has to serve tenants with state-required notices in writing).
There might also be rental tax fees, which are charged as a percentage of monthly base rent, Blanco says. Make sure all of these fees are clearly indicated with dollar amounts and frequency, such as a flat or recurring.
Pay attention to the time period you have to notify your landlord that you intend to move out or renew your lease at the end of your lease period. For example, if your lease states you have to give a 60-day notice of termination, but you give notice 59 days before the lease ends, you might be on the hook for one month’s rent after moving out, Noonan cautions.
Some landlords might allow you to become a month-to-month tenant at the end of a lease term, but don’t take just their word for it; get a new lease drawn stating that you’re renting month-to-month so you’re not unexpectedly asked to leave if the landlord finds another long-term renter to take your spot, Noonan says. A month-to-month lease should also spell out new lease termination deadlines and reflect any changes in rent.
One of the perks of renting is not having to pay for major repairs or maintenance. If a major appliance or system fails as a result of normal wear and tear, the landlord is generally responsible for paying to fix or replace those items. Your lease should spell out what items a landlord is responsible for maintaining and fixing, and have a clear timeline for when repairs have to be complete.
State laws also require that landlords keep the property in good operating condition. If your air conditioner goes out on a hot summer day and a landlord tries to shirk his responsibility to fix or replace it, he could be violating state law — and the lease agreement, Blanco points out. Your lease should give clear instructions for how to report maintenance problems and to whom.
Some landlords will let you sublet if you need to move out before your lease is up. Subletting can be tricky, though, because a subletting tenant isn’t held to the same rules as the primary tenant, Blanco says. For example, if the person subletting from you damages the property or doesn’t pay rent, you’re typically on the hook since you’ve agreed to vouch for that person.
Alternatively, your lease might contain language that prohibits subletting, so be sure to review it carefully before you take action.
A job transfer, family circumstances or deciding to buy a house are potential reasons you might move out before your lease expires. It’s wise to ask your landlord to add an early termination clause, which typically requires you to provide advance notice to break a lease early, as well as a flat, nonrefundable fee.
Landlords in hot rental markets could be more amenable to early terminations because they know they can fill an unexpected vacancy quickly. However, this might be harder to negotiate in slower rental markets, Blanco says.
If you decide to rent with a friend, partner or relative, landlords typically draw up one lease with both names listed. That means you’re both jointly responsible to ensure rent is paid on time and the lease terms are followed. If you’re renting with a friend and your friend doesn’t pay their share of monthly rent, you’ll have to come up with the difference or face eviction, in most cases, Blanco says.
A landlord can resort to eviction if a tenant doesn’t pay rent or breaches their end of the lease agreement. Your landlord simply can’t demand you move out in a day or toss your stuff into the street, however.
The eviction process is a detailed legal proceeding laid out in state law that requires a landlord to first send you a notice giving you time (usually three to five days) to address the issue, such as a late rent payment or having an unauthorized pet. In some cases, you might not be provided a chance to rectify the problem and receive an unconditional quit notice for violations such as repeatedly being late on rent, smoking in the property, or committing a crime on the premises. If you don’t respond to the notice, the landlord can file a lawsuit in civil court to terminate your tenancy.
Each state has different laws around tenancy termination, and it can move faster in some places than others. You might have a plausible defense in court, such as a landlord failing to follow paperwork procedures for eviction or if he didn’t maintain the property. If you don’t appear in court or the judge rules in favor of the landlord, the landlord must provide the court judgment to a local law enforcement agency to deliver to you. You’ll typically be given a short time window to remove your belongings from the property under the escort of a sheriff or marshal to ensure a peaceful eviction.
It’s important to note that the majority of renters in the U.S. have been protected from eviction since the early days of the pandemic, and the eviction moratorium is expected to continue. It doesn’t apply to all renters, however, and hasn’t completely prevented some landlords from trying, either, so it’s crucial to understand your rights.
This is just a sampling of some key rental lease agreement terms, and depending on your state and landlord, you might have additional language in your lease that needs clarification. A lease agreement is legally binding, so it’s important you know what you’re getting into, Blanco says.
“Don’t be rushed to sign anything; you might feel pressured to get it done but you need to fully understand what you’re committing to before signing,” Blanco says.
Landlord-tenant counseling agencies are a helpful resource for renters who need extra guidance understanding their rights and interpreting a lease. Check with your city’s housing office or local housing authority to speak with a counselor. These services are typically free.
