Originally published as "Important Provisions in Leases Help Protect Landlord, Tenant" in The Business Weekly of the Greensboro News & Record
Like any other contract, a written lease must contain the essential terms of the agreement between the parties. At the very least, this means a lease should include the names of the landlord and tenant, a description of the property, and the amount of rent.
Based upon these minimal requirements, "I rent my apartment on Elm Street to Mary Smith for $400 a month," may be a valid lease. But who would want such a vague agreement? Where is the rent to be paid? Can Mary Smith use the apartment for any purpose, including a dog kennel? Who pays each month for any telephone or utility charges?
To avoid such questions a lease should contain several important provisions beyond those required by law.
As a first concern, all leases should be in writing, even if the law does not require it. North Carolina's Statute of Frauds only requires that leases exceeding three years from the making need be in writing. Although oral leases may be valid, there is a saying that "oral contracts aren't worth the paper they're written on." As a good lease should include a number of provisions, an oral lease is almost guaranteed to lead to controversy and perhaps even a lawsuit.
The legal essentials for a valid lease are minimal. The parties must be identified and must have the legal capacity to contract. The property must be identified so that there is no uncertainty as to the premises being leased. Finally, the "material terms" of the lease, such as the amount and frequency of rent payments should be explained.
Other provisions frequently found in rental contracts include the following:
Any deposit required by the Landlord to secure the faithful performance of Tenant's obligations should be specified in the lease. For leases of at least a year, the amount of the security deposit cannot exceed two months' rent. The security deposit can be used only for purposes specified by statute, such as to compensate the landlord for nonpayment of rent, damage to the premises, or costs of re-renting the premises after tenant's breach of the agreement.
A lease should state what types of animals and number of pets, if any, are allowed in the premises. North Carolina statutes allow a landlord to require a non-refundable pet fee.
Use of the premises
If a landlord wishes to restrict the use of the premises, the lease should state the restrictions. For example, the rental agreement may provide that the tenant shall "use the premises for residential purposes only." Such a provision would prohibit the tenant from using the premises as a business.
Without a listing in the lease of permitted occupants, a tenant might allow other persons to share the premises. Rental agreements sometimes provide that the tenant will not allow or permit the property to be occupied or used as a residence other than by the tenant and certain persons named in the agreement.
A lease should provide the rights and duties of both the landlord and tenant as to repairing any damage to the premises. Most leases state that the landlord assumes responsibility for making any repairs that are the result of ordinary wear and tear. The tenant assumes responsibility for any repairs that are the result of intentional or negligent misuse of the premises. In addition, the tenant is usually obligated by the lease to keep the premises in a clean, safe, and presentable condition. The landlord is required to keep the premises fit and habitable.
The lease should state whether the landlord, tenant, or both will pay for charges such as water and sewer, electricity, property or renter's insurance, and property taxes.
Assigning and subletting
An assignment is the transfer of the entire balance of a lease to another person. A sublease is allowing part or all of the premises to be rented out to another person for a limited time. A lease often prohibits assignments and subleases altogether. On the other hand, the lease may allow an assignment or subletting with the landlord's permission.
A tenant is not entitled to an automatic renewal of a residential lease at the end of the rental term. Sometimes a tenant is allowed to remain in the premises following the end of a lease. However, such a "holdover tenant" is not protected by the terms of the expired lease. The addition of a renewal provision in the rental agreement can allow the tenant to renew the lease so long as the landlord is notified by a certain time.
An option to purchase is in some ways similar to a renewal provision. Under an option, a tenant can purchase the premises if notice is given to the landlord by a specified date. Details such as selling price, credit for rental payments, and division of closing costs are often included in the option to purchase.
Acts that terminate lease
A lease usually provides a description of acts that will terminate the rental agreement. Such conduct can include the tenant's failure to pay rent, the tenant's abandonment of the premises, or the tenant's failure to observe obligations in the lease. The specific means by which the landlord will assume possession of the premises should be also detailed. The right of a landlord to re-enter leased premises is governed by statute in detail and must be carefully observed.
Returning the premises
The lease may provide a description of the condition the premises must be in at the end of the tenancy. If the premises are damaged or in condition other than described, the landlord may be permitted to apply part of the security deposit towards repair. Like provisions detailing how a rental agreement will start, details as to how a lease will end can eliminate controversy between a landlord and tenant.
Articles are intended to provide general information and are not legal advice or a legal opinion. Specific questions should be directed to an attorney at Black, Slaughter & Black, PA., or to another lawyer.