Residential Lease Agreement FAQ
- Q. What is a residential lease?
- A. A residential lease is a legally binding contract made between a landlord and tenant. The lease gives a tenant the right to exclusive use and enjoyment of the described residential property in exchange for money paid to the landlord. Additionally, the lease outlines the rights and responsibilities of both the landlord and tenant during the lease term. LawDepot provides a written Residential Lease Agreement.
- Q. What is meant by Governing Law?
- A. The Governing Law will be the jurisdiction in which the property is located. It may or may not coincide with the jurisdiction in which the parties reside. The Residential Lease will be governed by the laws of the jurisdiction where the property is located.
- Q. What makes a residential property lease different from a commercial property lease?
- A. A residential lease is a lease for your home. Governments have recognized the sanctity of the home and have extended increased protections to tenants by enacting laws ensuring a minimum set of rights for tenants. A Residential Lease Agreement cannot take away these basic tenant rights.
- Q. Why isn't a verbal residential lease sufficient?
- A. The problem with oral agreements is that they can be difficult to enforce. If a dispute arose, a court would have to hear evidence and decide whose version of the truth to accept. If there is a written agreement, courts will generally be obligated to uphold the terms of the written agreement even if they don't agree with them.
- Q. What is addressed in a residential lease?
- A. A Residential Lease typically addresses the following:
- the type of property being rented;
- the address of the property being rented;
- the term of the tenancy and whether the tenancy is fixed or periodic;
- the amount of rent payable, how often and when the rent should be paid; and
- the provisions of any security/damage deposit.
In addition, a residential lease may also identify the following:
- taxes that are payable by the tenant;
- landlord improvements and signing incentives;
- tenant improvements and signing incentives;
- landlord and tenant repair obligations, who will pay for what utilities;
- whether the tenant can assign or sublet the property:
- notice provisions for termination of the tenancy; and
- insurance provisions.
- Q. Who are the parties to the lease?
- A. The parties to a lease are the lessor, also called the landlord, and the lessee, also called the tenant. The lessor owns the property and allows the lessee to use the property in exchange for monetary payments called rent.
- Q. What is a guarantor or surety?
- A. A guarantor or surety is a person who agrees to pay any losses directly to the landlord should the tenant be unable to pay the rent, or otherwise breach the tenancy agreement.
- Q. What if I don't know one party's name or contact information?
- A. A blank space will be provided in the form that can be filled in later if you are missing information about one of the parties. We recommend, however, that you attempt to make the contract as complete as possible, for greater certainty.
- Q. What are the landlord's obligations?
- A. The landlord's obligations are defined by the terms and conditions contained in the lease and the laws specific to where the property is located. The most important obligations of the landlord include providing the tenant access to the property and allowing the tenant peaceful enjoyment of the property. The legal owner of the property also has obligations to maintain the property to minimum standards.
- Q. What are the tenant's obligations?
- A. The tenant's obligations are defined by this lease and the laws specific to where the property is located. The most important obligations of the tenant are to pay rent on time and not to cause damage to the premises.
- Q. What happens if I breach a term of the lease?
- A. If you breach a term of the lease you are responsible for correcting it. If you are the tenant, this may involve you paying money to fix any problems caused by yourself or your guests. If you do not voluntarily pay to correct the breach you can be sued for damages sustained as a result of the breach and/or possibly evicted by the landlord.
- Q. Who can live in the premises?
- A. Only tenants and people listed as occupants may reside in the premises. The landlord must be informed and approve of any change to the list of permitted tenants. Children born or adopted while the tenant lives in the premises are automatically added to the lease as occupants. Also, each jurisdiction may restrict the number of tenants/occupants in the premises if that number violates health or safety standards for housing. Health and safety standards are typically expressed as 1 person per X sq. ft. The standard varies from jurisdiction to jurisdiction so if you are concerned, check with your local housing/public health authority.
- Q. What is a basement suite and how does this differ from renting a room?
- A. Typically, renting a room or a basement suite means you are sharing an accommodation with the landlord. A basement suite is a self-contained dwelling unit complete with its own kitchen, bathroom, and living area. Most tenants of a basement suite use a separate entrance to enter the house than the rest of the occupants. If you rent a room, you will likely share either the kitchen or bathroom with the landlord.
- Q. What are body corporate bylaws?
- A. A body corporate is the group of all the owners of lots or units which share common property. The body corporate bylaws refer to the set of rules governing the internal management of those lots. The bylaws may specify rules relating to noise, parking, behaviour of guests, pets, garbage disposal and the use of common property. The bylaws are sometimes referred to as a Community Management Statement.
- Q. Which lease term should I use?
- A. LawDepot allows you to choose from several different types of lease terms.
Fixed End Date
A lease with a fixed end date gives certainty of term for both the landlord and the tenant. It specifies the exact day the tenancy will end. The advantage here is that neither party has to give notice to terminate the lease, it simply ends on the specified date. During a fixed term lease the landlord cannot increase the rent, or change any other terms of the lease unless he specifically reserves the right in the agreement, and the tenant agrees to the changes.
Fixed Number of Weeks/Months/Years
A lease for a fixed number of weeks/months/years gives a start date for the lease and the number of weeks/months/years that the lease will run (for example: the lease could start on September 1, 2005 and then continue for a period of 18 weeks/months/years). In most respects this operates in exactly the same way as a fixed end date lease.
A weekly/monthly/yearly lease with automatic renewal (a periodic tenancy) will continue so long as neither party wishes to terminate the lease. To terminate the lease the landlord and tenant must give notice of their intention to leave as specified by statute. A landlord can raise the rent, or change the terms of the lease in these types of agreements by providing proper notice as required by statute. At the end of the notice period the tenant must move out or the landlord can start eviction proceedings against them.
- Q. What happens when the landlord tries to change the terms of a periodic tenancy?
- A. The landlord may not change the terms of the lease during the lease period (whether a week, a month, or a year). If the landlord tries to change the terms of the lease for the next period, the tenant has 2 options. The tenant may either accept the changes and continue to live at the premises, which will then renew the lease on the new terms, or give proper statutory notice to terminate the lease.
- Q. What happens when a tenant tries to terminate a fixed term tenancy?
- A. Typically when a tenant agrees to a fixed term tenancy, usually for either 6 months or 1 year, the tenant is agreeing to be responsible for the rent for that period of time. If the tenant vacates the premises prior to the end of the term of the agreement, the tenant will typically still be responsible for payment of rent for the entire length of the lease (provided the tenancy is not in a jurisdiction that allows the tenant to give notice to prematurely end a fixed term tenancy). Typically, if the Landlord is able to re-rent the premises prior to the end of the lease of the breaching tenant, the breaching tenant is no longer required to pay rent as the landlord cannot collect double rent for the premises.
In addition, some leases may contain penalty clauses whereby the tenant is required to pay "re-rental fees" to cover part of the cost of the landlord having to re-rent the premises. However, the amount of the "re-rental fee" has to be reasonable and must be a pre-estimate of the damages that the Landlord will suffer in have to re-rent the premises early.
- Q. What happens when the lease term expires?
- A. The expiry of the lease does not necessarily terminate the rental arrangement. If a "Periodic" term is selected, the lease will automatically renew based on the same terms as the first lease, unless it is varied by giving proper notice as required by statute. So a "Periodic monthly lease" that continues for one year is actually 12 separate, automatically renewing leases. The lease will continue to renew automatically until one of the parties wishes to terminate the lease (by giving proper notice as required by statute).
If a "Fixed" term is selected, the leasing relationship may still continue after expiry if both the landlord and the tenant wish it to. In some jurisdictions, statute dictates that it will become a Periodic term lease, usually of the month-to-month variety, though this may vary. In other jurisdictions, the Fixed term lease may become a "tenancy at will" or a "tenancy at sufferance" when it expires, which lasts only as long as both parties wish it to, and is not subject to as much legal protection as a Periodic lease. If you wish to terminate all rights under a Fixed term lease as soon as the lease expires, you must serve proper notice before the end of the lease term, in accordance with local statute.
Option to Purchase
- Q. What is an "Option to Purchase"?
- A. An option to purchase refers to a lease which allows the tenant to buy the property at an agreed price during the lease term. Usually the tenant pays the landlord a non-refundable option deposit and in exchange the tenant has the exclusive right to buy the property from the landlord. The tenant is given only a certain amount of time to exercise the option. If the Tenant takes advantage of the option, the Tenant's option deposit will go towards the purchase price of the property. If the Tenant does not take advantage of the option, the Landlord will get to keep the deposit and neither party will have any rights or claims against each other concerning the option.
- Q. What are the advantages of having a lease with an option to purchase?
- A. From the tenant's perspective, the advantage to this kind of lease is that they don't have to pay the purchase price up front. If the Tenant cannot qualify for a loan, then they have the option of purchasing the property at a later date when their finances are more secure. In addition, the purchase price may be fixed, so the tenant does not have to worry if the real estate market fluctuates.
From the Landlord's perspective, the advantages to this type of lease are that they can sell the property in a slow market and can charge a higher rent than they could using a regular lease. Also, if the buyer does not exercise the option, they get to keep the option deposit. Lastly, because the tenant has a vested interest in the property, they tend take better care of it than they would if they were just ordinary tenants.
- Q. What are the disadvantages of having a lease with an option to purchase?
- A. From the Landlord's perspective, there doesn't appear to be many disadvantages to this type of lease other than the Landlord will not receive an immediate cash sale on the property. Also, if the real estate market is rising, the Landlord could possibly lose out on the appreciated value of their property if they have specified a specific purchase price of the property. Consequently, it may be safer for the Landlord to make the purchase price equal to the market value of the property at the time the option is exercised.
From the tenant's perspective, the main disadvantage to this type of lease is that they will lose their option deposit if they fail to exercise the option. Often, tenants assume that they will qualify for financing at a later date but when it comes time to exercise the option, their financial situation has not improved.
- Q. How much notice do I need to give to terminate a tenancy?
- A. In most jurisdictions, there is a minimum period of notice required by statute. The lease can specify a notice period longer than the legal minimum, but it cannot specify a period shorter than the legal minimum. If it does, the legal minimum notice will still be required. You should consult the governing statute for these legal minimums as they will vary according to jurisdiction and the type and length of the lease.
- Q. What is notice to enter?
- A. A landlord usually does not have the right to enter a rented apartment suite unless there is an emergency, for example a fire or gas leak, or unless the landlord gives the tenant proper notice as defined by statute. So long as the proper notice is given, a tenant cannot refuse entry to a landlord.
- Q. What should I do if I do not want to renew my lease?
- A. You must provide proper notice to the landlord that you do not intend to renew the lease, before the lease expires. Notice must be given a certain amount of time before the lease expires, as dictated by statute in your jurisdiction. This amount of time is called the "notice period". Typically, the notice period is one month for leases with a term of one month or less, and two or three months for leases with a term of more than one month, but this will vary according to the jurisdiction. You should consult the governing statute for the jurisdiction the property is located in to find out the required notice period for your lease.
- Q. How often can the Landlord increase the rent?
- A. In general, 12 months have to elapse before the rent can be increased unless the Landlord and Tenant agree additional services and privileges are to be provided by the Landlord, in which case, the rent increase can be implemented at any time. For example, if the Tenant agrees with the Landlord and is provided with additional parking space, storage space, access to an exercise room, or any other services or benefits relating to the occupancy of the rental unit, the rent may be increased at any time.
- Q. What is a deposit?
- A. Please note: in some jurisdictions, a landlord is not allowed to ask for a security deposit. In other jurisdictions, a landlord may require both a security deposit and other types of deposits (for example, a pet damage deposit). You should review the governing legislation for the location of the property to make sure the type of deposit is allowable.
- Q. Is there a limit on how much the landlord can charge for a security deposit?
- A. This is governed by statute and differs from jurisdiction to jurisdiction. The statutory amount that can be charged is typically between half a month's rent to two months rent depending on the governing legislation.
- Q. When can the landlord deduct from the security deposit?
- A. The landlord can deduct from the security deposit when the tenancy ends and the tenant owes the landlord money for either unpaid rent or damage to the premises. The landlord generally cannot deduct for reasonable "wear and tear" on the premises, (i.e. wear and tear that occurs just from living in the premises). The landlord can deduct for stains on the carpet or countertops, large holes in the wall, and missing appliances and other such things that are beyond reasonable wear and tear.
- Q. What is an inspection report?
- A. Prior to moving in, the tenant and the landlord should walk through the premises and write down any existing damage. This written account is called an inspection report. The landlord and tenant should both get a copy of this report. In some jurisdictions, an inspection report is also required upon moving out, as a condition for the landlord to make a claim against the tenant's security deposit.
- Q. Why do I need an inspection report?
- A. An inspection report will help to prove what damage was caused by the tenant for purposes of deducting the amount to fix the damage from the security deposit.
- Q. What is an assignment and how does it differ from a sublease?
- A. Assignments and subleases both occur when the tenant gives his/her rights under the lease to a third party. A sublease or an assignment typically requires the consent of the landlord. An assignment occurs when the tenant gives to a third party all of his or her remaining rights under a lease for the entire term of the lease. If a tenant assigns property and the landlord consents to the assignment, that tenant no longer has any rights to the property nor any obligations to the landlord. In a sublease the tenant can transfer a portion of the leased space (e.g. a room in a house) or a portion of the tenancy (e.g. for 5 of the remaining 6 months of the lease) to a third party. The original tenant retains whatever rights under the lease he or she has that were not transferred to the third party, and also retains most of his or her obligations under the lease. The original tenant can still sue and be sued by the landlord for lease violations.
- Q. What are signing incentives?
- A. Signing incentives are bonuses the landlord gives to the tenant, typically for either signing a lease or signing a fixed term lease. They may include free month's rent, or a rent decrease for the months of the fixed term tenancy. If the tenant breaches the lease, these incentives may have to be paid back to the landlord.
- Q. Why do renters need insurance? Doesn't the landlord already have it?
- A. While the landlord typically has insurance, it usually covers only the landlord's assets and liabilities. If you want coverage for your personal belongings or for your own negligence, you need to have renter's insurance. What coverage you want should be discussed with an insurance agent.
- Q. What is meant by the "Act?"
- A. The "Act" refers to the legislation governing residential tenancy agreements in your jurisdiction. After you select the Location of Property when you are filling out the Lease Agreement Details, you will see a link beneath your selection to the governing legislation for the jurisdiction you have selected. It is not necessary to specifically state the name of the "Act" in your contract, as the relevant legislation is satisfactorily identified by the "severability" clause of your lease.
- Q. What is a "rerent levy"?
- A. When the tenant has broken the lease conditions and vacated prior to the expiry of the lease term, the landlord may charge a "rerent levy" to recover their lost rental income and costs associated with finding a new tenant. It is usually only charged when the term of the lease is six months or more, and some jurisdictions do not permit the landlord to charge a rerent levy. The amount charged must be reasonable given the circumstances, and must not exceed the damages that the landlord suffers from the tenant leaving early.
- Q. What does the clause "other charges will be treated as rental arrears" mean?
- A. Some rental contracts contain payments other than rental payments. For example the tenant may be required to pay utilities bills, or NSF charges, late fees or other charges.
If these charges are not paid by the tenant, the Landlord may treat these unpaid amounts as non-payments of rent and start eviction proceedings against the tenant for non-payment of rent. If this clause was not in the contract, the Landlord could not treat a failure to pay these bills as a non-payment of rent and could not start and eviction process as quickly (or at all in some cases).
- Q. What happens if I sign a lease but cannot move in or take possession?
- A. When you sign a lease, you are promising under contract that you will pay rent to the landlord. This is a legal obligation that courts take seriously. You may be liable to the landlord for loss of revenue that the landlord suffers as a result of you not paying the rent, even if you have a good reason for not being able to take possession. In some situations it may be less costly for you to simply take possession and immediately serve notice that you will be vacating as soon as the notice period expires - it may sometimes be better to pay for one or two months' rent than to go to court and be forced to pay more.
Because this is a complicated situation, you may wish to contact a qualified lawyer in your jurisdiction, especially if large sums of money are involved. You should inform your landlord immediately of the situation, so it cannot later be claimed that the landlord suffered losses as a result of not knowing that you were not going to move in. You may also wish to contact your local Residential Tenancies Board or government agency who oversees landlord/tenant disputes to find out the extent of your liability, which may or may not be limited by statute.