What Is a Lease Agreement

A standard lease agreement is a contract in which a lessor agrees to rent a property to a lessee. A lease may be used to rent an apartment to an individual or a family, or it may be used to rent a commercial space to an individual or a company. Lease agreements identify each party’s obligations with regard to renting a property. Here are some examples of important provisions contained in a lease.

Term

Virtually all lease agreements have a set length. For example, a residential lease will typically be one year in duration. A commercial lease may be five years in duration. A lease may state that it is automatically renewed upon expiration unless terminated in writing, or it may state that the tenancy shall become month-to-month after its expiration.

Rent

A lease will state the amount of rent due each month and may also state the total amount of rent due annually. A commercial lease may include a payment provision that includes a percentage of proceeds or gross revenue.

Insurance

A lessor may require a lessee to obtain one or types of insurance. For example, a residential tenant may be required to have renters’ insurance, and a commercial tenant may be required to have general liability insurance that names the lessor as an additional insured party.