What should I look out for in a lease?

There are several provisions within a lease that both parties need to be sensitive to. Make sure to read your lease before signing it to understand these sections:

  • Destruction. The lease will frequently set forth the rights of the tenant if the premises should be destroyed by fire or other catastrophe. A fairly typical provision would be to allow the tenant to declare the lease null and void if the premises cannot be restored to its prior condition within sixty days. Obviously the tenant does not have to pay rent during the period of time when the premises are not habit­able. Such a provision, however, may be highly detrimental to the tenant because it may obligate him or her to occupy the premises on the sixtieth day assuming it is restored to habitable condition. (That is not much solace to the tenant if he or she has no place to live or to run his or her business during this sixty day period.)
  • Subletting. Frequently a lease will bar subletting. This may be important from the landlord's point of view because the general rule of law is that any contract (including a lease) can be assigned unless there is a provision within the con­tract that says it cannot be assigned. An assignment simply means that one party to the contract may assign or sell his or her rights to a third person. In the case of a tenant, the subletting of the premises is an assignment of the tenant's rights to a third person who would then have the right to occupy the premises in lieu of the tenant who signed the lease. However, if the lease precludes that, then subletting may be prohibited. (From a landlord's point of view such a prohibition is desirable because the landlord wants to know with whom he or she is dealing.)
  • Uses. The lease should expressly state what the tenant's intended uses of the premises are and confirm that these uses do not in any way violate any condominium associa­tion regulations, homeowner's association regulations, or zoning regulations.
  • Taxes, utilities, insurance, and condo fees. The lease should indicate who is responsible for payment of these.
  • Security deposit. The lease should expressly indicate what the amount of the security deposit is, who is holding it, whether it is being held in an interest-bearing account, and how much time the landlord has after the termination
    of the lease to make an accounting for and return of the security deposit.

  • Obligations and rights of the parties. The lease should indicate exactly what the respective obligations and rights are of the landlord and the tenant. Things that should be addressed are the landlord's right of access, the tenant's right to make alterations, the need for smoke detectors or carbon mon­oxide detectors, and the use of any heavy equipment or electrical items that may overload the system .
  • Subordination. If the owner of the property is liable on a mort­gage or deed of trust as to the property, then it is prudent for the owner to state in the lease that the lease is subject and subordinate to all mortgages and deeds of trust. Most leases will also state that the tenant agrees to sign all documents upon the request of the landlord confirming subordination or in the alternative the landlord is authorized to sign such documents on behalf of the tenant. (This issue would only come into play if the premises were going to be refinanced or sold and the lender required some confirmation that, in the event of a foreclosure, its right to foreclose would not be impeded by the existence of tenants on the premises.)
  • Joint liability. If there are two or more tenants on the lease, then the lease may expressly state that the tenants are jointly and severally liable. That means if there is a default or a breach by the tenants, the landlord can collect 100% of the money due on the lease from either one or both of the tenants. (That provision works to the landlord's advantage because it allows the landlord to collect 100% of the lease payment from either tenant.)
  • Personal guarantee. If the lease is in the name of a business entity, frequently the landlord will require a guarantee of the person who owns or manages that business entity. (That obligates that person on the lease as if he or she were named as a tenant.)

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