Real Estate Leases: Tennant's Point of View

Real Estate Leases: Tennant's Point of View

In many cases, tenants have limited control over the terms of a lease of real property. Historically leases have been "take-it-or-leave-it" legal documents. However, where the rental market is soft many landlords will make concessions to get a good tenant.

Tenants' Leases

Most tenants will expect to sign a landlord's lease and many may not question the terms. Occasionally a tenant might want to make a change in a lease or to offer his or her own lease. Whether a landlord should agree to either of these would depend upon how tight the rental market is and whether the differences are acceptable.

If a tenant took the trouble to prepare his or her own lease, it’s likely that it includes provisions more favorable to the tenant.  Innocent-looking clauses may end up costing the landlord a bundle.  From the landlord’s perspective, l it is better to let the tenant suggest changes to landlord’s lease.

Concessions

It is possible for landlords to make concessions. Landlords lose money every day a rental unit sits vacant and if you look like a good tenant and offer a reasonable compromise in a lease, it might be accepted. This is especially true if the market is soft or the unit has been vacant for a long time. "It can't hurt to ask" is a theory you should use when negotiating a lease. 

Tenants rarely offer their own leases and landlords would probably not accept them in most cases, but again, it cannot hurt to ask. A situation where it would be most likely that you would be able to use your own lease form would be where the owner of a property was not experienced in leasing it.

Unconscionable or Unenforceable Leases

In the previous section landlords are warned about unconscionable leases.

If a lease is so unfair that it is shocking to an ordinary person it can be held illegal or unenforceable, even if a tenant supplied the lease form.

However, there are not many situations in which a tenant could get so good a deal that it would be unconscionable. The biggest danger is that the lease could be held unenforceable. There is a legal principle that holds that a contract must be enforceable by both sides. If you give yourself a loophole to get out of the lease whenever you want, then the landlord will probably also be able to cancel the lease at any time.

The following are some of the most important things for a tenant to look for in a lease:

  • grace period for late payments/ no automatic termination
  • no automatic forfeiture of any money
  • cancellation of the lease if the premises are unusable

There are many other clauses that are important to have or to avoid. Be sure to read every clause in a lease you are considering signing and do not sign the lease unless you understand them.

One of the most common questions asked of lawyers by tenants is whether leases are enforceable. In most cases the answer is yes. That is the purpose of a lease; to obligate both parties for a set term. If you sign a lease and leave before the end of the term it may be possible for the landlord to let the unit sit vacant and sue you for the rent, even if the lease has several years remaining.

Lawsuit and Judgments

If you leave before the end of the term of a lease, the owner could sue you, but is less likely to do so if a new tenant is found quickly. But in most states a judgment is good for many years. If a landlord sues you for breaking a lease, then you may have a judgment filed against you for thousands of dollars including back rent (possibly double rent), damages to the property, court costs, and attorney's fees. This may ruin your credit, or it may even turn into a lien on property you own in the future.

If you are sued by a landlord, then you should not ignore the suit. If you are not properly served with notice of the suit, the landlord may be unable to get a judgment against you, but once you have been properly served the landlord can be granted everything he or she asks for unless you object. If the landlord asks for more rent than is owed, more damages than you caused, or late fees that are not owed, then the judge may grant them unless you present your side of the case.

Personal Liability

Corporations in a commercial rental: One way to avoid the risk of personal liability is to have a corporation sign the lease. Unfortunately, most landlords will also want a personal guaranty from the owners of the corporation. However, in a soft market you have a good argument that the landlord should be happy with the rent as long as the business is in operation, and that he will not need your personal funds once the unit becomes vacant.