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All That You Need to Know About Renting

  • Published On 14-Sep-2022
All That You Need to Know About Renting

            All That You Need to Know About Renting

What is Lease?

A type of incorporeal right in the shape of a contract that defines the terms and conditions under which a person lends an asset such as real estate to another person.

The person who lends the property is called a lessee or tenant, while the person who owns the property and lends it out to the other person is called the lessor. A lease contract ensures the use of the property by the tenant and guarantees the regular reception of payments by the owner in exchange.

Understanding a Lease:

Not all leases are the same, and the terms and conditions of different leases are defined differently depending upon the demographics and the type of property. However, a general lease contract comprises the following elements;

  • Pet policies
  • Duration of lease
  • Rent amount
  • Consequences of breaching
  • Responsibilities of both the parties
  • Specified security deposit
  • Rent due date

Generally, it is observed that almost all the residential lease contracts are the same with a little bit of variation. However, commercial leases usually run from 1 to 10 years and are negotiated according to a specific lessee. Longer, more complicated lease agreements are common among larger tenants.

Types of Leases:

Besides residential leases, different types of commercial leases have been formulated to ensure the implementation of the tenant’s responsibilities and to enhance the profit of the landlord.

The tenant may be required to pay rent plus the landlord's operational costs in some commercial leases, while in others, the tenant may also be required to pay taxes and insurance. The four most common types of commercial leases are;

Gross Lease:

In this type of lease, the landlord is responsible for the management of the property and pays all the costs for it. While the tenant pays only the due rent.

Single Net Lease:

The tenant pays property taxes along with the due rent in a single net lease.

Double Net Lease:

In these types of leases, a tenant is also responsible to pay property taxes and insurance.

Triple Net Lease:

A triple net lease restricts a tenant to pay management costs, insurance, and property taxes.

Can You Break a Lease?

A lease can be broken by either party. However, the consequences of doing so may be severe, so it's not recommended. There may be an early release charge and/or a balance due when the lease is terminated that tenants are required to pay to the landlord. Some tenants may even see their credit score negatively affected by breaking a lease. A landlord may have to provide tenants with alternate living spaces, while those who break their leases without cause may face civil or legal challenges.