How to understand a lease or rental agreement

June 12, 2020

Renters, here’s a simple guide to help you understand your lease before signing it

Understanding your lease or rental agreement before you sign it is essential.

Why? Because it’s a legally binding contract between the tenant and the landlord that outlines the rights and responsibilities of each party.

Although trying to understand this often complex document can seem like a daunting task, the good news is it doesn’t have to be! 

Here’s our simple guide on how to understand a lease or rental agreement before you sign it.

Before we start:

What’s the difference between a lease and a rental agreement?

The words “rental” and “lease” are often used interchangeably, but there are a few notable differences between the two.

  • Rental agreements are typically for a 30-day period or on a month-to-month basis.
  • Lease agreements are usually for an extended, fixed amount of time—typically six to twelve months.


The basics

Every lease or rental agreement will include the following basic information.


  • The address of the property
  • The names of the people signing the lease
  • The agreed rental amount
  • The rental payment due date
  • The security deposit amount
  • The length of the rental lease agreement
  • Contact details for maintenance, repairs, management issues, and requests.  


It should also outline:

  • The late fee policy
  • Pet policies and fees
  • How utilities are managed
  • Maximum occupant rules
  • The early termination policy.


The details

The lease or rental agreement will also often include details about specific rules, including:

  • Parking
  • Visitors and overnight guests
  • Smoking
  • Subletting
  • Interior and exterior decoration/modification policies. 


What to look out for

An important part of learning how to understand a lease or rental agreement is looking out for any clauses that may pose an issue in the future.

These items have been known to create issues for tenants. Keep an eye out for these key terms, and if found, try to negotiate or have them removed from the lease if possible. 


  • Limit on landlord responsibility to provide habitable housing

Generally, your landlord is legally required to provide you with housing that is livable and in compliance with state and local health and safety codes.


  • Shared utility meters

You may end up paying more than your fair share of the utility bills, so it’s worth discussing your options with the landlord before signing.


  • Automatic rent increases

While the amount of rent you pay will often change when you renew a lease, avoid clauses that give your landlord the right to automatically raise your rent at other times: for example, to offset an increase in the property taxes, insurance, utilities, or any other operating costs.


  • Unrestricted property access for the landlord

Be wary of clauses that give landlords permission to enter the rental property without notice. Thankfully, there are laws in many states that override what’s written in a lease to protect tenant privacy and limit landlord access to the rental property—so do your homework before you sign.


  • Hold harmless clauses

These absolve the landlord of liability for any injuries or damage suffered by the tenant as a result of the landlord’s negligence or failure to maintain the property. Although most courts will not enforce these types of clauses, you should ask the landlord to remove it before signing.


Our advice

By taking the time to learn how to understand a lease or rental agreement, you’ll protect your rights as a tenant and know exactly what to expect when living in your new rental property.

When signing, make sure you:

  • Take your time to read through everything carefully
  • Ask for clarification on any parts you don’t understand
  • Keep your copy of the signed agreement in a safe place.  


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