A lease term specifies the period a lessee can occupy a rental property, as agreed upon by the lessee and lessor with the possibility of renewal. A lease term is a part of the lease term sheet, which consists of the whole lease agreement. A lease term is also known as a lease period or a lease tenure. A lease can be indefinite, a period, or a fixed one. Negotiating in a lease term is an art in itself and requires a good mathematician's brain too. A lease is often confused with rent, but rent is usually of a shorter duration than a lease. To know the 'lease term' in detail, wade through the blog till the end.
Key Components of a Commercial Lease Term
Since we discovered all the possible components of a residential lease, let us know the essentials of a commercial/business lease:
- Parties: Identifying the parties involved in the lease term is essential. Unawareness of the parties involved can lead to several disputes and a lot of headaches. Businesses and people are to be treated differently.
- Property: The clause concerning the property is called the premises clause. In the case of an entire building, it is important to declare the whole street address in the lease term. When an office is given on lease, the owner must also state added amenities.
- Purpose: A space on lease can’t be used for any purpose the tenant wishes. A use clause can be broad or narrow depending on the landlord.
- Modifications: A tenant often requires space alterations, which must be catered to. There has to be a mutual agreement between the landlord and tenant regarding hiring the right designers and monitoring project completions.
- Amenities: An amenities clause generally includes things like parking spaces. If these things are discussed beforehand, it will prove to be a perk for both parties.
Three Types of Lease Terms
There are mostly three most popular types of lease terms. There is no right lease term; it depends on the owner's priorities and strategies.
- Month-to-Month Lease: A month-to-month lease comes with a lot of added benefits. A month-to-month lease helps eradicate the concern of being locked up for a longer period. The renewal process is also easier in a month-to-month lease, along with providing a sense of protection.
- Six Months Lease: This type of lease term is a good middle ground between too-short and too-long lease terms. The problem of lower turnover in a long-term lease is overcome by adopting a 6 months lease. Six months lease terms are secure and provide enough time for a landlord to assess a tenant. However, an important factor to remember is the season, as getting new tenants at your property in the cold climatic conditions is a bit risky and difficult.
- One-Year Lease: This type is the most common and popular among all the lease terms. However, high-quality tenants should be preferred in this type of lease term. There has to be a proper screening process before signing a lease. Due to covid 19, countries now have moratoriums on evictions as well, which means you cannot force a tenant to leave the property before having a place to shift to.
Key Features of a Residential Lease Term
It is important to know the components of a residential and commercial lease system. A few features might be common. However, knowing what differences exist is equally important for both parties. Here are a few elements of a residential lease:
- Property Address: Writing the address in the lease term is essential to a residential lease.
- Roles and Responsibilities: It is important to segregate the roles and responsibilities between both parties. The more the roles are discussed before implementing the term, the better it will be for smooth functioning.
- Security Deposit: The tenant's first deposit must be a security deposit. Submitting a security deposit is non-negotiable and is a compulsion.
- Consequences of Breach: It is illegal to breach the lease and can lead to some consequences that can be very difficult to overcome.
- Amount of Lease: This is the most basic component of a term lease. This should be the priority of the agreement.
Differences Between Short and Long Lease Terms
A term lease can be short-term or long-term. However, a short-term lease is still bigger than a typical rent. Both the term lease offers few benefits. Here are a few benefits of a short-term lease:
- Getting More Freedom: When one signs up for a short-term duration lease, the person has more freedom to move from one place to another quickly. In any sort of inconvenience with the owner or the property in general, one can easily move from there and is not bound for long.
- Changing Conditions Easily: Sometimes, the conditions are agreed upon at a particular time in life because the priorities might be different, but priorities change with time, and sticking to those conditions becomes difficult. In this circumstance, a short-term lease is far better than a long-term one.
Signing this type of lease also has some benefits, as it was in the case of a short-term lease. It depends on the tenants which benefits are important to them and what type of lease they would like to choose.
- Paying a Cheaper Rent: The longer the duration, the less the lease is generally. One gets to benefit from a cheaper and affordable lease. If saving money is a person's top priority, no matter the conditions, it is often agreed upon as a long-term lease.
- Having a Fixed Place: Moving from one property to another is generally difficult. Shifting repeatedly involves transportation and additional costs like that of movers and packers. Negotiating lease terms every time is also difficult, so signing a long-term lease is preferred.
Key Terms for Lease Terms
- Deposit: The first payment type in any agreement, after which the rest due is paid, is known as a deposit.
- Tenant: A tenant is somebody who has occupied a particular space for a temporary period and pays due to the owner.
- Breach: It is a violation or infringement of law or duty and is a type of civil wrong
- Incorporeal Right: It is a form of intangible right, i.e., can't be seen or touched, and the intangible properties include copyrights, etc.
- Moratorium: It is a type of suspension of activity for a legalized period related to law.
Final Thoughts on Lease Terms
So, now that the importance of the lease term is established, you might need legal help with the lease term. Commercial lease lawyers will help you with the proper documentation and verification, and since the landlord-tenant contract is usually a tedious process, seeking professional help is always a better idea. While lease terms usually last 12 months to even 10 years, rent generally lasts 30 days time duration. One can't easily break a lease term as it has many consequences, e.g., a penalty.
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