Lease Agreement: What It Is & Terms & Conditions
A lease agreement outlines different terms and conditions for a particular lease between two parties.
None of those terms and conditions can be changed unless the lease duration is over. Both the renter and the landlord are supposed to obey the terms and conditions of the law and cannot change them.
But what are those terms and conditions? How do they work? What is a lease agreement? If you want to find out the answer, I would suggest giving this article a read.
What Is A Lease Agreement?
A lease agreement simply means the contract two parties sign during the leasing process of a property of any type. The two parties involved are the lessor and the lessee. This agreement allows the lessee to use the property owned by the lessor during the period mentioned in the lease agreement. The lessee needs to make periodic payments for the leased property.
The nature of a lease agreement might allow the lessee to make minor modifications and changes to the leased property. However, the lessee is responsible for the property’s condition during their stay on the leased property.
Some of the leased properties may include a house, a room, vehicles, construction equipment, and other different items of these sorts.
What Does A Lease Agreement Include?
A lease agreement usually has some necessary content and parameters that need to be filled out by both parties. Here are some shared content that a lease agreement needs to include –
- Name of both parties (lessee and the lessor) and the agents.
- Property description (the type of property and its condition).
- Amount of periodic rents, mention of due date, grace period, fees for late rent payment. It could also include if the renter needs to have a renter’s insurance.
- Rent payment methods.
- Methods for turning down the rental agreement and the mention of any charges associated with it.
- The amount of money the lesser needs to submit as a security deposit and the description of the account where it is saved.
- Description of the amenities, facility premises, security system, laundry, and more.
- Property rules like pet friendliness, noise rules, and penalties associated with the violation of the laws.
- Proper identification of the parking space should be included in the lease agreement if the lessor provides it.
- The lease agreement should also include how the repair requests are made.
Standard Clauses In A Lease Agreement
Here is a list of different common causes in the lease agreement –
Term
The first and one of the most critical clauses outlined in the lease agreement include the time for which the agreement will remain effective. The common term or the duration of a lessee agreement is usually 11 months in most countries.
Rent Deposits
Most rental properties, especially real estate ones, require a security deposit to be stored with the lessor. The rental agreement or the lease agreement needs to outline the rental deposit one needs to submit while renting the property. The agreement also outlines the terms as to how it should be returned or adjusted at the end of the lease period.
Terms Of Use
The term of use means the type of use the property will go through in the hands of the lessee. Also, the lease agreement includes the rules and regulations governing the property’s use.
Utilities
The rented property usually comes with utilities the renter must pay for. The renter pays Some of the utilities separately, and some are included in the rent.
Insurances
The commercial rental agreement commonly specifies whether the renter has to insure the BBMP Property tax and property tax payment.
Repairs & Maintenances
Commercial rental agreements usually mention that the lessee or the lessor needs to keep the property in good condition. The repair and maintenance clause outlines who should be in charge of this duty.
Why Is A Lease Agreement Duration 11 Months Long?
When renting a property, the tenant needs to lease the property for a long time period of 11 months. The average length of time for a lease is usually 11 months. However, have you ever wondered why these lease agreements have an 11-month-long lease time?
Here are some reasons –
Leases Below 11 Months Duration Do Not Need Registration
The provisions of Section 17, Registration Act 1908, make it mandatory to register an agreement that exceeds the duration of 11 months. According to this, leases that are less than a year in duration do not need registering.
Reduces Upfront Cost
You will basically reduce your upfront cost by signing a lease agreement with a tenure of 11 months. Leases that do not need registration are devoid of any stamp duty obligation. The landlord and the tenant have to sign a lease agreement to avoid the costs related to stamp duty. When the agreement has a shorter duration, the stamp duty is also lowered, allowing both the lessee and lessor to reduce their costs.
Landlords Can Easily Raise Their Rent
An 11-month lease works in the landlord’s favor by allowing easy lease termination. The landlord can increase the rent they charge their lessee thanks to a short-term lease agreement. Also, a shorter agreement reduces future disagreements.
Also, it is easy to revoke a non-registered and notarized agreement. One can easily terminate an 11-month lease after 11 months. The lessor also can stay up to date with the current rental market this way.
Pros & Cons Of A Lease Agreement
Here are the pros and cons of a lease agreement –
Pros
- Landlords usually prefer a lease over a rental agreement because of specific reasons. They are secure, short-term, and hassle-free.
- It allows a stable rental income stream and lower expenses for turnover.
Cons
- Landlords may miss out on the opportunity to earn a lump sum of money by signing a lease agreement. If the lease agreement for a property is done in a place where new properties are being developed, then the property rents will also increase gradually. So, if the market rent is higher than what is already fixed, less than the lessor is missing out on some income.
Final Words
Despite its pros and cons, lease agreements are better any day when someone is thinking of renting a property for a limited time span. It does not come with lots of complex legal work while also keeping both the lessee and the lessor under specific legal binding. Hopefully, the terms and conditions outlined about different lessons were clear in this article.
However, please reach out to us if you have any additional queries about the same topic. We will answer your concerns as soon as possible.
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