Most terms and conditions of a lease agreement between a Landlord and Tenant are usually subject to negotiation and are not “set in stone” unless and until agreed upon by both parties. In most instances the Landlord presents the Tenant with a Lease Agreement and the Tenant assumes that it’s “a take it or leave it” situation, which is not necessarily the case.
A lease agreement, like any agreement, is intended to be mutually beneficial to all parties. After all, that’s the whole point of an ‘agreement’. So, it should safeguard both parties by removing ambiguity that may lead to conflict. With that said, what are the obligations of a landlord?
The Landlord’s obligation (by law) is to provide the tenant with a habitable space free from disturbances and nuisance; a space suitable or good enough to live in. If the roof blows off, for example, the premises is no longer habitable and this is where the Landlord is legally responsible to make good or the agreement becomes voidable.
However, maintenance issues such as a leaking faucet, a running toilet, or a blown light bulb, depend upon what the parties agreed to when entering the lease agreement. The same applies to gardening and pest control.
Minor Repairs
A typical lease agreement will make reference to “minor repairs” and will define same as “any repair up to a specific dollar amount (negotiable)”, but what is more commonly used is a percentage of the monthly rental payment, such as 10%. So for example, if the rent is $50,000 per month, and the minor repair clause stipulates that all repairs up to 10% of the monthly rent is the responsibility of the tenant, then any or every repair up to $5,000 is the responsibility of the tenant.
What happens if the repairs exceed $5,000, for example the amount is $7,000? Is the Landlord now responsible for the full $7,000 or just the difference of $2,000? Depending on the wording of the agreement, the tenant may still be responsible for the first $5,000 and the Landlord the difference; or the fact that it exceeds $5,000 makes it no longer a minor repair and the Landlord is responsible for the entire amount.
Early Termination
Notice for early termination by either party is negotiable, if there is no clause that speaks specifically to it, one (1) month is the norm, but if you don’t want to be surprised you may want to stipulate/negotiate 2-3 months’ notice by either party.
Rental Increases
Rental rate increases are also negotiable, but in most cases are controlled by the Rent Restriction Act. If applicable, the rental rate cannot be increased by more than 7.5% on an annual basis. However, this is somewhat redundant as the Landlord has no obligation to renew the lease. Therefore, if the landlord wants to increase the rent by more than the 7.5% of the previous rent, they can simply notify the tenant of their intent not to renew upon expiration and then offer/advertise the premises at the higher rent. If the tenant accepts the higher rent as advertised, the landlord has successfully circumvented the Rent Restriction Act as it relates to the maximum rental increase (an attorney may offer a different opinion).
To continue reading, purchase Vol.8 #9, 2016 Issue.
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Most terms and conditions of a lease agreement between a Landlord and Tenant are usually subject to negotiation and are not “set in stone” unless and until agreed upon by both parties. In most instances the Landlord presents the Tenant with a Lease Agreement and the Tenant assumes that it’s “a take it or leave it” situation, which is not necessarily the case.
A lease agreement, like any agreement, is intended to be mutually beneficial to all parties. After all, that’s the whole point of an ‘agreement’. So, it should safeguard both parties by removing ambiguity that may lead to conflict. With that said, what are the obligations of a landlord?
The Landlord’s obligation (by law) is to provide the tenant with a habitable space free from disturbances and nuisance; a space suitable or good enough to live in. If the roof blows off, for example, the premises is no longer habitable and this is where the Landlord is legally responsible to make good or the agreement becomes voidable.
However, maintenance issues such as a leaking faucet, a running toilet, or a blown light bulb, depend upon what the parties agreed to when entering the lease agreement. The same applies to gardening and pest control.
Minor Repairs
A typical lease agreement will make reference to “minor repairs” and will define same as “any repair up to a specific dollar amount (negotiable)”, but what is more commonly used is a percentage of the monthly rental payment, such as 10%. So for example, if the rent is $50,000 per month, and the minor repair clause stipulates that all repairs up to 10% of the monthly rent is the responsibility of the tenant, then any or every repair up to $5,000 is the responsibility of the tenant.
What happens if the repairs exceed $5,000, for example the amount is $7,000? Is the Landlord now responsible for the full $7,000 or just the difference of $2,000? Depending on the wording of the agreement, the tenant may still be responsible for the first $5,000 and the Landlord the difference; or the fact that it exceeds $5,000 makes it no longer a minor repair and the Landlord is responsible for the entire amount.
Early Termination
Notice for early termination by either party is negotiable, if there is no clause that speaks specifically to it, one (1) month is the norm, but if you don’t want to be surprised you may want to stipulate/negotiate 2-3 months’ notice by either party.
Rental Increases
Rental rate increases are also negotiable, but in most cases are controlled by the Rent Restriction Act. If applicable, the rental rate cannot be increased by more than 7.5% on an annual basis. However, this is somewhat redundant as the Landlord has no obligation to renew the lease. Therefore, if the landlord wants to increase the rent by more than the 7.5% of the previous rent, they can simply notify the tenant of their intent not to renew upon expiration and then offer/advertise the premises at the higher rent. If the tenant accepts the higher rent as advertised, the landlord has successfully circumvented the Rent Restriction Act as it relates to the maximum rental increase (an attorney may offer a different opinion).
To continue reading, purchase Vol.8 #9, 2016 Issue.
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