5 Things to Review on Your Lease

If you're ready to rent a place, you'll want to carefully review a few things on the lease before you sign on that last line.
If you're ready to rent a place, you'll want to carefully review a few things on the lease before you sign on that last line.
Pete Gardner/Digital Vision/Getty Images

Prior to the real estate bust and quickly ensuing Financial Meltdown of 2008, everyone, it seemed, owned a home, was buying a home -- or wanted to buy one. The popular wisdom asserted that home ownership constituted the very foundation of the American Dream. Once you'd gone deep into debt for a mortgage on a McMansion, "you'd arrived." On the other hand, to rent the roof over your head was like tossing money into a luxury apartment's gas fireplace. Or so the prevailing sentiment went at the time.

Post-crash, the many advantages of renting are much easier to appreciate: Renting gives you the mobility to move around and follow opportunity; major maintenance and repairs fall upon the landlord, not you; and as a renter, you don't have to sweat (as much) about skyrocketing property taxes or plummeting property values.

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Renting can seem like an obvious choice in an age where so many former constants in life, like steady employment, are no longer guaranteed. Renting may be someone's only choice after a run of hard financial luck or if too brief a credit history makes it impossible to qualify for a mortgage.

If you're about to rent a place -- whatever the reason -- you'll want to check a few things on the lease before you sign on that fateful last signature line. The patchwork of landlord-tenant laws throughout the 50 states and numerous local ordinances mean that landlords have plenty of opportunities to present leases with invalid or downright illegal clauses for where you live. You can avoid onerous extra payments and strike lots of other tenant-hostile provisions if you take time to learn your rights as a tenant and review the lease before signing.

If the landlord (or property management company) refuses to modify the lease when you raise objections, you do have the option to walk away. If other renters are clawing at local listings like zombies on the living in a George A. Romero film, you might consider how inflexible you wish to be with any particular clause.

That said, you have your legal rights as a tenant (and as a potential tenant) and you you should be aware of them. In that spirit, we present these 5 things to review on your lease. Keep them in mind next time you rent -- because your hard-earned money is a terrible thing to waste...on legal fees!

And just an aside to all the legal eagles out there -- nothing in this article is meant to substitute for qualified legal advice. If you have an issue that requires the advice or services of an attorney, get one. Furthermore, wide variations in state and local laws mean that material in this article may apply in some areas, but be invalid in others. Consider these tips to be "for informational purposes" and check your state and local rental laws before you jump into a lease.

5

What happens if you need to break the lease?

Know what kind of contract you're getting into when you rent a new pad. Strictly speaking, the term "lease" applies to longer-term contracts -- typically a year or longer. Leaving the property before the length of time specified in the lease could also leave you on the hook for the remainder of the money you'd owe for the rest of the period in the lease.

Even so, most places require the landlord to at least make an honest effort to re-rent the place before slapping you with a bill for the remaining year's rent. Check your local statutes if the lease says you owe for those unused remaining months.

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In general practice, reasonable landlords will allow a tenant to "break the lease," for a good cause, especially in tight markets where rentals fill quickly. However, they may exact compensation in the form of an early lease termination penalty -- such as keeping your security deposit. Without exception, they must let you break the lease without penalty if you join active military service and give notice. In some states, tenants may also legally break the lease for good reasons such as a job move or inability to stay for health reasons (your ill health or a relative's) [source: Stewart].

If you know or even have an inkling that you'll be a short-timer, it might not be a bad idea to opt instead for a "rental agreement" which covers shorter periods -- typically anywhere from one to six months. Thing is, turnover is terribly expensive for landlords. So short-term rental agreements can be tough to find, especially in more desirable areas; therefore, expect to pay a premium if you can't commit to a year or more.

4

Be our guest...just not for too long.

Landlords want to know -- reasonably enough -- who's living in and on their property.
Landlords want to know -- reasonably enough -- who's living in and on their property.
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Landlords, if they're business savvy, take great care in approving and declining applicants who wish to be tenants. This "screening" process is meant first and foremost to weed out those who present a sizable financial or safety risk. In other words: deadbeat and criminal tenants. Property owners and managers take a gamble that whomever they approve will be responsible with paying the rent, not tearing the place apart and not posing a nuisance or menace to neighbors.

They want to know -- reasonably enough -- who's living in and on their property. Thus, expect some kind of restriction on the length of time guests are allowed to stay. Around two weeks is a typical amount of time a lease will permit a non-tenant to reside in the unit. Any longer than that, and the person will likely have to have his or her name added to the lease -- perhaps with a higher monthly rent, perhaps not.

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It's good to know ahead of time what the policy is, so that you don't get a nasty letter when your couch-crashing pal from out of state garners the property manager's unwelcome attention.

When the lease is first drawn up, come clean with the landlord about who will be living in the unit -- be sure to include the number of people (including children) and their names. Do note that the law prohibits landlords from discriminating against potential tenants just because they have children (except in special cases such as retirement communities).

3

Minding Your Home-based Business

Lots of people work a business on the side to make extra money and they run it out of their homes. For some, a home-based business is their main means of support. But what does your lease have to say about that? Many leases contain specific clauses that forbid commercial activity conducted from the rental unit. In the modern era however, this could be impossible and even undesirable to enforce in many cases. Take for instance, businesses where no physical goods or in-person services are exchanged -- like if you perform freelance work completely from your PC. If you were a landlord and you knew a tenant paid her rent simply by shuffling electrons back and forth over the Internet all day, would you really care?

Things get a bit trickier and stickier, however, if that business involves meeting with lots of clients and generates significant foot traffic on the premises. Landlords also aren't crazy about commercial deliveries shuttling to and from their rental property all week. Two big legal concerns are at play here -- local zoning laws and insurance liability. The last two things the landlord wants are Igor the Overeager Zoning Inspector snooping around and handing out fines or one of your clients tripping on a weed in the sidewalk and suing the pants off of the landlord and you.

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Many cities have specific criteria and restrictions when it comes to out-of-the-home businesses. We're not advocating breaking the law here in any way, shape, or form. But even if what you're doing is harmless, we're with New York attorney Jeff McAdams, who advises, "The best plan for staying out of trouble is to keep a low profile, and not attract the landlord's attention in the first place" [source: McAdams].

2

What's the security deposit policy?

No article on residential leases would be anywhere near complete without mention of the oft-contested security deposit. If you're a potential tenant trying to scrape together the required first and last month's rent for your initial payment, the security deposit can seem like a cruel obstacle planted in your path, like one of Hercules's 12 Labors.

No, the gods of Greek mythology don't have an axe to grind against you. But the landlord does want to make it very painful, financially, for you to damage his or her investment. The "security" deposit is all about the landlord's security, not yours. It's a small insurance policy against you or your guests trashing the apartment beyond "normal wear and tear." That's why you want to get really clear on what's considered "normal" before you sign.

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Punching holes in the plaster is an obvious no-go. Common sense should dictate too that painting the walls Day-Glo Orange won't pass, flying colors or otherwise. But what about tiny holes from thumbtacks or small nails? Small wall scuffs from moving furniture around?

The point we're getting at here -- see to it that the lease defines somewhere the specific conditions upon move-out that will forfeit part or all of the security deposit.

Also find out when and how, after the lease is up, you'll receive your security deposit back (and make sure it's being held in a trust or escrow account, not under the landlord's mattress). Because after all, you will have been the model tenant and will be entitled to receive most or all of it back, right?

Another thing to watch out for: "non-refundable" deposits. It's quite common for landlords to charge an application fee to cover their costs of reviewing the application and paying for background and credit checks. This is not to be confused with a blanket "non-refundable deposit," which many landlords try to slip into the lease terms, but is illegal in many states. One exception where landlords get to keep your upfront money: pet deposits. No, not those yucky things pets leave on the sidewalk, but the fee landlords charge tenants for the right to keep a pet on the premises. You probably know what we're going to say next -- check your state and local laws to see what applies where you live!

1

Loser Pays Legal Fees Clause

Most experts (other than a lawyer) will recommend you do everything possible to find a resolution out of court.
Most experts (other than a lawyer) will recommend you do everything possible to find a resolution out of court.
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Landlords and property management companies get sued a lot. Much the way your exposed flesh excites a swarm of hungry mosquitoes, these openly run businesses present tempting and often easy targets for litigious people. Sometimes litigation comes about because the property owners were, in fact, negligent. With all those railings, stairways, walkways, gates, and countless breakable items, a rental property is in many ways a lawsuit waiting to happen. Lots of times it's no one's fault, really; a person slips, gets injured on the property and a lawyer convinces him that suing the property owner will bring an easy payday.

Other times, a dispute over something either party was supposed to do according to the lease escalates beyond the ability of friendly reconciliation to solve it. Most experts other than a lawyer will recommend you do everything possible to find a resolution out of court. Such cases are often more trouble than they're worth for everyone involved -- except the attorneys.

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One way landlords try to deter frivolous (and expensive) suits is by specifying that if the tenant loses in court, the tenant must pay all the legal bills and court costs. So if you sue and the court decides in favor of the landlord, you're left holding the bag for his attorney's fees, the administrative court fees and your own lawyer bill. That particular clause in the lease might not state that if the landlord loses, he or she must foot the legal bills all around, plus whatever damages the court awards to the tenant. But in many states, that's precisely the case -- no matter which side loses, the winning complainant has the right to demand compensation for legal fees.

Naturally, there are lots more things you'll want to pay attention to before you commit to making someplace your new home for the next several months -- or perhaps even for the next few years. For instance, if you are a disabled person, federal law provides numerous exemptions and exceptions to typical lease requirements. Without looking too hard, you can find a robust amount of pro-tenant information that's intended to help you protect your rights -- you should become familiar with it [source: FindLaw.com].

You don't have to be a contract attorney to secure fair and decent housing. For particulars on landlord-tenant laws where you live, you can find state-by-state summaries on sites such as Nolo.com or FindLaw.com.

Armed with this knowledge, you'll feel more confident recognizing your rights and whether a lease tramples on them or respects them. It just takes a few extra minutes to read the lease once you've been accepted as a tenant. If you spot something fishy in the document, you'll be glad you took the time to check it out. And if instead it all reads well, you'll have the peace of mind of knowing your rights are protected by a solid lease agreement.

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Author's Note: 5 Things to Review on Your Lease

It's true that a few landlords are shady dealers looking to cut corners and make a killing off their clueless or cowed tenants. In my experience, many more landlords are decent folks who work hard to provide others with a comfortable home, while perhaps eking out a small profit. No matter which kind you get, the lease will either be your ace in the hole or your undoing if a dispute arises. Having rented (and rented out) a number of homes over the years, I can personally attest that a well-written, locally enforceable lease can prevent major headaches for both landlord and tenant during the term of occupancy.

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Sources

  • Anderson, Sally. "15 common renter's rights." MSN Real Estate. (June 19, 2012) http://realestate.msn.com/article.aspx?cp-documentid=13108370
  • FindLaw.com. "Your Rights as a Tenant." (June 19, 2012) http://realestate.findlaw.com/landlord-tenant-law/your-rights-as-a-tenant.html?DCMP=GOO-REAL_Tenants-Rights&HBX_PK=tenants'+rights
  • Hodges, Jane. "Rent vs. Own." Chronicle Books. 2012.
  • McAdams, Jeff. "How to Run a Business from Your Apartment without Interference from the Landlord." Mcadamslaw.net. Oct. 21, 2010. (June 25, 2012) http://www.mcadamslaw.net/backissues-10-21-10.html
  • Moore, Stephanie. "Renting a House or Apartment - Your Rights as a Renter." ConsumerAffairs.com. (June 20, 2012) http://www.consumeraffairs.com/rentals/how02.html
  • RentLaw.com. "Landlord Tenant Statutes." (June 20, 2012) http://www.rentlaw.com/statuerentlaw.htm
  • Stewart, Marcia. "Breaking a Lease and Leaving Early." Nolo.com. (June 22, 2012) http://www.nolo.com/legal-encyclopedia/free-books/renters-rights-book/chapter9-5.html
  • Stewart, Marcia; Warner, Ralph and Portman, Janet. "Leases & Rental Agreements -- Important forms every landlord needs." Nolo. 2011.