Lease Agreement

Overview

A ‘Lease agreement’ is an arrangement between two parties lessor and lessee, by which the lessor allows the lessee the right to the use a property owned or managed by the lessor for a specified period of time, in exchange for periodic payment of rentals. The agreement does not provide ownership rights to the lessee. However, the lessor may grant permission to the lessee to modify or change the property to suit his needs. The lessee is responsible for the condition of the property during the lease period. Lease agreements may be used for the lease of properties, vehicles, household appliances, construction equipment, and other items. The lease agreement outlines the conditions of the arrangement so that each party understands his rights and obligations under the lease.

ESSENTIAL CONDITIONS FOR LEASE

  1. There must be an immovable property or movable property
  2. The transfer of right must only involve the right to use the property i.e. possession and not ownership.
  3. The consideration for lease shall be periodical payment which is either rent or Lump sum or both.

Note:- A lease that extends for a period of more than a year can only be made through a registered document.

WHAT SHOULD LEASE AGREEMENT CONTAIN?

  • Names of the lessor and lessee or their agents or legal representatives.
  • Description of the property which is going to be leased.
  • Amount of rent and due dates, grace period and late charges.
  • Mode of payment.
  • Methods to terminate the agreement prior to the expiration date and charges if any.
  • Amount of security deposit and the account where it is held.
  • Utilities furnished by the lessor and, if the lesser charges for such utilities, how the charge will be determined.
  • Amenities and facilities on the premises which the lessee is entitled to use such as swimming pool, laundry or security systems.
  • Rules and regulations such as pet rules, noise rules and penalty for violation.
  • Identification of parking available, including designated parking spaces, if provided.
  • How tenant repair requests are handled and procedures for emergency requests.

MAJOR COMPONENTS IN A LEASE AGREEMENT

Terms of Use

The terms and conditions regarding use of the property which is leased out should be clearly mentioned in agreement

Repairs and Maintenance

The responsibility of repairs and maintenance of the property whether lessor or lessee should be clearly mentioned in lease agreement.

Deposits

The amount of deposit required the purpose of each deposit, and conditions for return or adjustment of deposit at the end of the lease period.

Rent

The consideration or payment made by the lessee to the lessor in exchange for the property leased out.

Insurance

Whether the lessee is required to ensure the property, this is most often used in commercial rental agreements.

Duration

In Lease agreement, the duration of the lease should be clearly mentioned in the agreement.

BREACH OF A LEASE AGREEMENT

When a lessee is in breach of a lease agreement, the lessor can legally terminate the lease. The most common breach of a lease agreement occurs when a lessee fails to pay consideration in a timely manner, though failure to adhere to other provisions of the lease also constitutes a breach. When a lease has been breached by a lessee, the lessor must follow certain steps required by state law to take legal actions against lessee. The first step is giving the written notice specifying how to cure the breach. If the lease has not been cured, the lessor may take legal proceedings with the local court to recover the property.