What Is A Lease Agreement & How Do You Build One?

In the world of property management, there are so many documents that property managers and landlords need to keep up with.

From legal documents to different letters for your tenants, it can become difficult to maintain every document for a rental property.

However, there is one document that no property manager will ever lose track of - the lease agreement.

In this article, we will be going over all aspects of a lease agreement, including what it contains, what power it has, and some tips for writing one.

To begin, let's go over what the lease agreement is and what it does.

What Is A Lease Agreement?

A lease agreement is a formal, written contract between a landlord and tenant that outlines a variety of different things.

Lease agreements, in their most basic form, guarantee the lessee (the tenant) use of the property and guarantee the lessor (the property owner or landlord) payments from the tenant. Although this may sound simple, lease agreements can get tremendously complicated and difficult to understand.

Just like other legally binding contracts, once the lease agreement is signed, both the tenant and the landlord are bound to it. This means that they must follow precisely what is in the contract or they may face legal consequences.

But, that begs the question of what someone can expect to find in a lease agreement?

In the next section, we will discuss some of the most common things that a lease agreement outlines.

What Is Included In A Lease Agreement?

It will be impossible to go over everything that can be included in a lease agreement because there are simply too many things.

Instead, we will be outlining some of the most common things that are found in lease agreements and what they mean.

Description Of Rental Property

One of the first things that should be included in the lease agreement is a description of the rental property. This includes information such as:

• Address
• Unit number
• Parking spots
• Special features
• Storage areas

…and anything else pertaining and special to the property.

You should also specify here any areas of the property that the tenant is not allowed to access. This is especially true if it is a residential property.  

Contact Information

Another very important piece of information that every lease contract should contain is the landlord's contact information.

This is extremely important because, in the case of an emergency or maintenance, the tenant has to have a way to contact you. If not, there may be issues that go unsolved for too long which can result in legal consequences.

Security Deposit/Fees

Security deposits are another very important piece of information that needs to be included in lease agreements.

Since the security deposit can cause many disputes between landlords and tenants, it is important to be very clear in this section. You should explain how the security deposit may be used as well as what any fees are for.

Rental Price

Apart from including how much the price of rent is, you should explain anything else that pertains to the rent. This includes:

• How often to pay rent
• Where rent payments should be sent to
• Whether or not late fees are charged
• Any other fees pertaining to rent

This can clear up any confusion in the future if a tenant gets charged a fee that they did not expect.

Also, this section is important because it distinguishes between a lease agreement and a rental agreement. Rental agreements are typically for shorter periods of time while leases are for longer periods of time.

However, even if it is a lease or rental agreement, all of this information should always be present.

Maintenance Policies

One of the main points of dispute between landlords and tenants is maintenance.

In order to minimize the risk of losing monthly rent, landlords should outline exactly what their maintenance policies are. Apart from listing everything that the tenant is responsible for, the lease agreement should also include the right things to do when maintenance is required.

For example, if you have some third-party software, you may instruct the tenant to go to some portal and request the maintenance there. Instead, you can also instruct the tenant to contact you directly.

Any Other Rules/Policies

Although we just went over some of the most important things that lease agreements typically contain, there are still so many rules and policies that can exist.

Some of these include:

• Smoking policy
• Pet policy
• Illegal activity
• The name of every tenant responsible for the property

...and much more.

However, apart from the different rules and regulations that can be included within a lease, there are also different types of leases.

Below, we will briefly explain the different types of leases and their differences.

Different Types Of Lease Agreements

In property management, there are actually a few different types of lease agreements. Each of these has its own pros and cons and is used for a specific purpose.

Below, we have outlined some of the different types of lease agreements and what each one means.

Absolute Net Lease

The absolute net lease is a very common kind of lease agreement where the tenant is responsible for every expense. This includes insurance, property taxes, and maintenance.

The most common tenants that are under absolute net leases are business or corporations that have a thorough understanding of the lease. And, since the tenant is accepting the burden of paying everything, they are typically charged a lower monthly rate.

Modified Gross Lease

A modified gross lease is an agreement where the property owner is responsible for the expenses like the insurance, property taxes and the maintenance. However, the tenant is responsible for any minor maintenance costs, as well as utilities and anything janitorial.

Due to the property owner taking on most of the expenses, the monthly rent for the tenant is probably going to be higher when compared to the absolute net lease. Also, the property owner may charge a monthly premium for taking care of the entire property.

Full Service Lease

Finally, the full service lease is a very common kind of lease agreement for large apartment buildings with many tenants living in them. This is because, in a full service lease, the property owner takes care of all of the expenses while the tenant only pays on monthly rate.

In this case, the tenant does not have to worry about paying any extra fees, but the monthly rate can be much higher.

So, now that we know all about lease agreements and the different types that exist, there is only one final question:

How do we build one?

In the next section, we will quickly discuss how to build your very own lease agreement.

How To Build Your Own Lease Agreement

The easiest way to build your own lease agreement is by visiting DoorLoop's Forms Page and downloading one of our completely free templates!

First, you're going to want to choose which kind of lease agreement you want to build. This could be residential, commercial, month to month, or even a sublease.

From there, you can choose your state and download the template in either PDF or Word format. Then, you fill out all of the fields and that's it!

You now have a fully built lease agreement to give to your tenants!