Building a Free Lease Agreement Online Part 1: The Parties, Date and Basics
With the dearth of decent free residential leases online, this series of articles will break down basic parts and clauses found in typical residential leases, with an example you are free to use, but which we make no promises or guarantees about, and emphasize we are not providing legal advice.
The first section of the lease needs to nail down the most basic elements – who the parties are, what the property is, and what we’re doing with the property (leasing, lease with option to purchase, triple net leasing, etc.) and the date of the agreement. It’s OK to add a few other terms or specifications if they are helpful, but the first paragraph shouldn’t be bogged down with fine print – that comes later. The first paragraph should serve to quickly tell someone reading it (the tenant, a judge later in court, etc.) the basics of what this is about.
This may sound simple, but you want to make sure you get the parties to the agreement right. With residential leases it’s unlikely the party you’re leasing to will be a corporation, trust or other entity, but who exactly is going to be living in your property, and who exactly is going to be responsible for payment of the rent (and use full names). If three competent adults are going to be living in the rental, you probably don’t want to let just one or two sign the lease. You want them all. If three roommates share a place but only one signs the lease, the other two are likely to eventually figure out they may be able to leave that person holding the bag. They will want to whine the others aren’t paying “their share” and skip out. Hold them all responsible. I’ll discuss “joint and several” more in another post, but I like to make it clear in the first paragraph as well that all parties on the leasing side are jointly and severally responsible for payment and damages. That means as far as you are concerned there aren’t “shares” (they can work that out among themselves, but it’s not your concern). You can collect what’s due from any or all of them in any amounts. There are some people who can’t be a party to a lease contract, basically anyone who isn’t competent. Minors (children) aren’t competent. People declared by a court mentally incompetent aren’t, well, competent. Also, make sure you are the right party to be leasing; if you have placed the title of the property in an LLC, or a trust or something, you personally can’t lease it. The party leasing it needs to be the LLC or trust it’s titled with. Also, if you have an assumed name (DBA or “Doing Business As”) that you’re using, it’s probably a good idea to include that. Sometimes parties are called Lessor and Lessee, but they can also be called Management and Resident, or other similar terms as long as you define the parties as them.
You want to include the date of the agreement; this isn’t necessarily the date you’re granting possession, that can be agreed to be a later date elsewhere. This is the date everyone signs the agreement. This becomes important especially if there were earlier agreements because later you are going to declare those void after the date of this contract to avoid confusion.
Basics of What’s Happening
You can just say lease or rent; sometimes more legal terms like “let” or “demise” are used. If you’re doing something other than simply granting possession (renting), then that needs to be clear somewhere in the contract (if it is a lease purchase, call it that), and what better place than in the first paragraph. Often “consideration” is talked about in terms of contracts. Consideration is required for a contract to be valid, but it’s just defining what each party is giving to the deal. You don’t have to state something like “consideration is”; in a lease the consideration you’re giving is possession of the rental, and the tenants’ consideration is whatever they are giving you (usually money, of course, but if you agree to take pigs or cows that’s still valid consideration), you just want to make sure the consideration is clearly spelled out. That includes making sure the unit or property being leased is clearly identified, at least by address. All the terms of the consideration aren’t necessary in the first paragraph, especially if they are complicated, but putting the address being leased in the first paragraph is a good idea.
So, if we put all that together, it might look something like this (words in capitals with asterisks around them are blanks you would have to fill in):This agreement made effective *DATE* is between *YOU OR YOUR LLC ETC.* (hereinafter called Lessor), his/her heirs or assigns, and *NAME OF TENANT(S)* (hereinafter called Lessee, “Lessee” defined as all persons entering into this Agreement with Lessor). All persons comprising Lessee, including any co-signors, guarantors and sureties, are jointly and severally liable for obligations arising herein. Lessor lets to Lessee, and Lessee leases from Lessor, the residential unit located at and known as *ADDRESS* (hereinafter called Premises), under the following terms:
And there you have it. You’re off to a good start.