Contracts and Leases: The Basics

Ah, the good old days when deals where made on a handshake! Today it is in the best interest of both the landlord and the tenant to have everything about the rental and tenancy agreement spelled out clearly in writing. These agreements describe and protect both the rights and obligations of both parties eliminating confusion that could lead to unpleasant disputes.

Remember, by law in order to enter into such an agreement an individual has to be eighteen years of age.

There are essentially two kinds of agreements, rental agreements or long -term leases. Each has value and offers various benefits to both tenant and landlord and only you can decide what suits your situation best of all. You can find these agreements in a number of places easily. In fact, you can browse, select and buy these on-line forms from Apartments.com with just a click.

Rental agreements are unique in that they do not iterate any specific time for the tenancy and so allow for the greatest flexibility for both parties. They do spell out the rights and obligations of the landlord and tenant and the terms and conditions of tenancy. They are often used for month-to-month rentals and renew automatically at the end of each month unless one or the other provides written notice to the contrary. So, on the plus side everyone gets lots of flexibility. The downside for a landlord is the potential exposure for higher tenant turnover and therefore, vacancies. In high demand markets where rentals are in short supply this can be a good way to go because it allows a landlord to get rid of unsatisfactory tenants knowing that they are more easily replaced. It also allows a landlord to increase rents or change other terms with greater facility than lease agreements will allow.

Lease agreements spell out all the same rights and responsibilities but always specify a specific period of tenancy making the financial life of the landlord more secure. It does however lock in the specifics of the agreement for the full term of the lease, so that landlords cannot change the rent being charged or other conditions unless the lease allows for it in very specific language. Leases offer the trade-off of security in exchange for flexibility and may be a very good option where demand for units is not very high or when that stability of long-term tenancy is a higher priority for you as a landlord. As always, knowing what your own goals are and how much risk you can afford to expose yourself to, are keys to success.