The lease should set forth the rights and responsibilities of the Landlord and the Tenant. Briefly, the Landlord is obligated to provide the property and usually reserves the right to re-enter and to collect rents.
Tenants can expect quiet enjoyment of the rental unit and are obligated to pay rent, not damage the property, and to respect the rights of other Tenants.
Building Rules
Most leases for multiple-occupancy buildings (residential or commercial) have an auxiliary section entitled “Building Rules.” These rules are usually made part of the lease agreement by reference and provide a more detailed treatment of day-to-day matters, such as the Tenants’ use of common areas, parking spaces, and hours of building operations. They are designed to protect the condition, reputation, and safety of the property and to promote compatibility among the occupants.
Building rules apply to all Tenants of the same type. They cannot be arbitrarily or selectively enforced, although rules for upper-floor residential Tenants can differ from those for ground-floor commercial stores. The Property Owner reserves the right to add to or change these rules in a reasonable manner during the term of the lease, after giving proper notice. Many residential leases likewise will have a section entitled “Rules and Regulations” that contains guidelines for parking, housekeeping, guests, party noise, and other regulative terms.
Condemnation
Most lease forms also include a clause providing for equitable cancellation of the agreement in the event that the Tenant is denied use of the property because it has been either appropriated or condemned by a government agency.
Compliance Clause
All leases should include a compliance clause that identifies which party is responsible for complying with any new local, state, or federal regulations. All leases should now contain language that allocates compliance with the Americans with Disabilities Act (ADA) between the parties.
Assignment and Subletting Provisions
Provided that the terms of the lease do not prohibit such activity, a Tenant has the right to assign or sublet his or her interest in the property. Assignment of a lease transfers all of the Tenant’s remaining right in the property to a third party. Subletting transfers sonly some of the Tenant’s interest (transfer of part of the premises, transfer of the premises for part of the remaining term, or a combination of both). Most leases prohibit the Tenant from assigning or subletting the rented space without the Owner’s prior written approval. This ensures that the Owner has stable and financially secure Tenants occupying the property. State statutes, however, have been passed in some jurisdictions modifying the unlimited right to prohibit assignment.
Fire and Casualty Damage
State statutes and lease provisions for fire loss, damage, and property restoration vary widely. When drafting a lease, the Manager should keep in mind the types and amounts of insurance to be carries on the property, who will pay the premium, and who will receive the proceeds if there is a loss.
When a multiple-Tenant property is damaged or destroyed to such an extent that enjoyment of the premises is impaired, the Tenant may vacate immediately and notify the Owner in writing of the intent to terminate the lease as of the date possession was surrendered. The Owner also may be given the option to repair the damage and make a rent allowance to the Tenant for a certain period of time. If portions of the premises are still habitable, the Tenant can vacate the unusable area and reduce the rent proportionately. If the destruction can be tied to negligence on the part of the Owner, some state statutes all the Tenant to recover damages.
For the Owner’s protection, the Manager should be certain the lease includes a clause stating that damage caused by a Tenant will be repaired without a rent abatement and that the Owner may take legal action against a Tenant. Most leases permit the Owner to terminate the tenancy if fire completely destroys the property’s usefulness.
