Fri April 27, 2012, 11:22am
What is a Real Estate Lease Agreement - Is Renting the Same as Leasing Real EstateReal Estate Lease Agreement
A Real Estate Lease Agreement is a legally binding contract between the landowner and the tenant for a specific span of time. Similar to any other type of lease agreement, it indicates the responsibilities and rights of both parties.
Real Estate Lease Agreement is segregated divided into two sections - commercial lease and residential lease.
It is important to protect your property against fraudulent activities, and hence the need of a lease agreement. Further, it secures the tenants against eviction and ensures the rent payments are made on time. Hence, a Real Estate Lease Agreement protects both the landowner and the tenant under any circumstances.
Various elements of real estate lease and their significance:
In this agreement the rights of possession by the tenant is declared. The landowner vows no interference in the property until the occupancy is established. However, it does not indicate that the landowner cannot visit the property. In case of repairs, due maintenance schedules and any other activity mentioned in the lease, the landowner has full authority to enter the property.
Any type of lease may specify reasons for restrictions on use of the property by the tenant. For instance, a residential lease can forbid the use of the property for commercial purpose. Meanwhile, a retail lease can specify the types of product to be sold in the space. In the absence of constraints, the tenant can utilize the property for any lawful purpose.
The lease agreement specifies the beginning and an ending date for the lease to be effective. The period in between the front and back end dates, would not require a notice to vacate. The tenant would vacate on the closing date of the lease agreement, unless the contract is renewed.
Interestingly, leases can run for months or years. Some states allow very long leases in excess of 100 years, while for others an eleven-month lease is appropriate.
Provision for one or more security deposits against the possibility of non-payment of rent or damages to the property is established in the lease contract. Stringent laws on the handling of deposits and the payment of accumulated interest has been written. Some laws favour the fact that interest should be paid to the tenant while the landowner holds the deposit, while others argue it differently. The deadline for refunding the deposit is just before the lease period is about to end.
Usually, during the lease period the landowner does not involve in making improvements, unless otherwise specified. Meanwhile, the tenant can get the property white-washed, or fix the leaks and damages with the permission of the landlord, however, these upgrades would become the assets of the landlord upon the completion of the lease.
In commercial leases improvements clauses are more prevalent, as office building require constant expansion and upgradation to accommodate their business requirements.
Depending if the property is commercial or residential, the maintenance of real estate varies significantly. For a residential property, the landowner is responsible for maintenance and repairs while the lease is in effect. On the contrary, to an extent the tenants are responsible for the preservation of the building.
Real Estate Lease Agreement will indicate if the subletting is allowed and under what circumstances. Under subletting option, the tenant holds the liability of payment of rents and bears the responsibility for any damage to the property.
Several landowners provide the clause of renewal of lease prior to the cessation of the lease period. With due notice, a pre-agreed period can be renewed by the tenant. Additionally, the new rental amount must be indicated in the agreement.
Further, the tenant can choose to purchase the property during the lease period. The agreement addresses the same, and the landowner may apply a few of the rental payments towards the purchase price, or simply can choose otherwise.
Singing up a real estate lease contract is certainly helpful for landowners seeking to generate second income from their investment in property. Further, leasing improves the property value and creates a hassle-free maintenance programme by the tenant, if the property owner is unavailable for regular maintenance affairs or physically too feeble to personally supervise the regular enhancement proceedings. For the tenant it safeguards against eviction. Hence, the leagla document creates a win-win situation for both the parties.