Different Types of Lease Agreements

This post, "The Different Types of Rental Lease Agreements," was originally published on the Apartments.com Renterverse in 2021.

More than a third of households in the United States live in rental housing, according to the Joint Center for Housing Studies. With about 43 million people across the country signing leases, you can be sure that there are plenty of different types of rental lease agreements out there to accommodate renters. While having different types of residential leases is beneficial, as a renter, you need to know which one works best for you. Before you navigate through the lease your landlord provides, you need to understand what leases are available and decide which one works best for you.

Fixed-Term Leases

A fixed-term lease is the most traditional lease. They’re called fixed-term leases because tenants and landlords agree to abide by the lease for a fixed amount of time, normally six to 14 months. These leases should have the lease start and end dates clearly labeled near the top of the lease. Once you and your landlord sign the lease, it can’t be changed during the dates specified, including things like the rent amount and rules. You are also not usually allowed to break the lease early, and your landlord cannot cancel the lease early (unless they have a just cause).

Fixed-term leases are great for people who know they will stay in the same place for a while. These leases also offer security because the rent price won’t fluctuate month after month, and you don’t have to worry about your landlord not renewing your lease like you would from month to month.

The main issue with fixed-term leases is that they are almost impossible to break without penalty. If you find out that you need to move before your lease ends, it could be quite costly. Sometimes, landlords will let you pay a few months’ rent to break the lease, and some may allow you to find a subtenant, but in most cases, breaking a fixed-term lease isn’t easy.

Month-to-Month Leases

A month-to-month lease, also known as a periodic lease or a short-term apartment lease, is a rental lease agreement that typically lasts for 30 days. As long as proper notice is given, your landlord can change the terms of the rental agreement. This means that they don’t have to renew your lease. They can change your rental price or change certain rules, as long as notice is given. Your state laws outline the length of proper notice.

A month-to-month apartment lease agreement is a good option for people who need temporary housing because you can cancel your lease if you give your landlord notice. The downside to a short-term apartment lease agreement is that while it gives you the freedom to cancel your lease, it also gives your landlord the same thing. If notice is given, your landlord does not have to renew your rental agreement. The other main issue with a month-to-month lease is that your landlord can change the price of rent at any time with proper notice.

Both lease types have pros and cons for renters to consider. Before you sign a lease, make sure you take note of the lease start and end dates. Know that leases are legal documents, so once you sign, you are agreeing to the terms.

Joint Leases

A joint lease is an important term to understand for those leasing with roommates. In a joint lease, you and your roommate(s) sign the lease together, therefore agreeing to the terms of the lease. You are each responsible for following the rules and paying rent together. Typically, landlords will put all money owed on the same bill. Even if you contribute your share, you could still be evicted if your roommate doesn’t give you the remaining rent. How you split costs is up to you and your roommates to decide and enforce. Your landlord will want the entire amount and often will have clauses in the lease stating that they don’t get involved in roommate disagreements and disputes.

The benefits of a joint lease are that you can share the financial responsibilities with another person. If you have a joint lease with a trusted person, it can help build your credit score and rental history. The issues with a joint lease arise if your roommate is not reliable. Be careful when choosing a roommate, and ask your landlord to run a background check on everyone you’re renting with. This will reveal things like bad credit and past evictions.

Subleases

A sublease is when a tenant leases their rental property to a third party with their landlord’s permission. Landlords handle subleases in different ways. Some landlords aren’t really involved in the process. They might leave it up to you to find a subtenant and make a contract. Then, they add the addendum to the lease and run a background check on the person subleasing. Other landlords may be more involved and have a specific process that they follow. In either case, the name of the original leaseholder remains on the lease. If your subtenant doesn’t make a payment or refuses to pay for damages, then you will be held responsible. When you get a subtenant, think of yourself as a cosigner. If they fail to pay, your landlord will look to you for the money owed.

A lease takeover, which is different from a regular sublease, is when you are no longer responsible for the property. The new tenant completely takes over your lease for the remainder of the time.

Whether your landlord allows subleases or lease takeovers is up to state laws and their discretion. Your lease should state whether sublets are allowed and outline the process if they are. Make sure that your lease follows your state's laws on subleasing.

Lease Cosigner Agreement

A cosigner agreement is an addendum added to a lease where another person agrees to take financial responsibility for the property in the event that the tenant doesn’t make payments.

There are a lot of benefits to having a co-signer. If you have no or low credit, a cosigner can help you build up your credit and rental history. They are also good for people with evictions, as they give your landlord extra assurance while they help you rebuild your rental and credit history.

You’ll want to make sure you have a reliable co-signer. If you fall short on payments, you will want them to follow through with their end of the deal. If they fail to make payments, you and your cosigner could end up with an eviction.

Residential lease agreements can get confusing and involve hard-to-read legal jargon, but it’s important to know what lease you have and what it will mean for you before you sign it. If you have a question about anything, ask your landlord to clarify and double-check your state laws to make sure they’re following them accordingly. Once you understand the basic lease types, you’ll be on your way to understanding how to read your lease and becoming an informed and educated renter.

Published August 25, 2021

ABOUT THE AUTHOR

Hi! I'm Olivia, a writer for Apartments.com. As a renter myself, I can relate to the triumphs and pitfalls of being a renter. I'm here to give advice and answer questions about everything from lease agreements to decorating your rental!