LEASES

A lease is a contract between an owner, called lessor, or landlord, and a lessee, or tenant. A tenant is given the right to possess and use the landlord抯 property in the exchange for rent.

REQUIREMENT FOR A VALID LEASE :

1) Be in writing, if the term is more than one year. Any alternations must also be in writing.

2) Contain the names of the lessor and lessee.

3) Contain the sufficient description of the property. In some cases a street address is sufficient for a simple residential lease.

4) Show the amount of rent and manner of payment.

5) State the duration or time period the lease is to run, or in the case of periodic tenancy, the periods involved.

6) Be signed by lessor. Technically, a lessee need not sign the lease to make it valid. The lessee抯 possession of the property is considered to be acceptance of the agreement. However, to eliminate misunderstanding, a landlord should insist that the tenant sign the lease.

7) Have a lessor and a lessee who are legally able to contract.

8) Have any renewal or extension provisions in boldface type. A renewal or extension provision is a clause that automatically renews or extends the lease if the lessee remains in possession after expiration of the lease.

MAJOR TYPES OF LEASES:

1) Gross lease. Tenant pays flat rental amount, and the landlord is responsible for taxes, maintenance, and insurance.

2) Triple net lease. Tenant pays rent, and tenant also pays the landlord抯 property taxes, maintenance, and hazard insurance. This type of lease is used when leasing commercial property on a long-term basis. Rather than being called a triple net lease, this is sometimes referred to as a 搉et lease?/FONT>

Percentage lease. Rent is based on a percentage of the tenant抯 gross sales梥ometimes uses a combination flat rent, plus a certain percentage of the tenant抯 gross sales.

Extension of a lease. The continuation of an old lease will be an extension.

Renewal of a lease. This occurs when the existing lessor and lessee renegotiate a new lease upon the expiration of the existing lease.

Escalator clause. These clause allows the landlord to increase the rent during the term of the lease if costs increase. Frequently tied to the consumer Price Index or producer price index.