When you decide on finding the perfect apartment, expect to sign a lease. However, before committing yourself to a lease agreement, you need to understand the different apartment lease types.
Most importantly, you should know how to read an apartment lease and understand the lease your management company or landlord wants you to sign.
Although the type of lease might not strike you as being as important as, say, the number of bathrooms and bedrooms or the monthly rental amount, you might prefer one option over the other. If you fail to understand the terms of your lease from the start, you might find yourself exposed to the risk of financial loss.
Here, we take you through the different rental property lease options to help you have an enjoyable renting experience.
Apartment Lease Options
The apartment lease option you select will significantly impact your rental experience. Therefore, you should understand the lease option you are signing since you cannot change it after appending your signature.
Let’s consider the lease options below:
This is also known as a term lease and refers to a lease having a predetermined end and start date. In most cases, the lease period ranges from 6–months to at least a year. However, there are cases where the lease ranges from 2 to 3 years.
When the fixed term lease expires, the tenant could renew the lease, as long as the landlord allows for it, it could transition to a month-to-month lease, or the tenant will move out. The lease stipulates exactly what happens when the lease ends.
All property managers and landlords should follow up with their tenants just before the lease ends to remind them of what will happen when the lease expires, along with their options.
Most property managers choose to renew the lease after expiration. Remember, a lease renewal could involve a one month’s rent increase. Learn when your landlord can increase rent here.
Fixed Rental Rates
For the fixed term lease, rental rates remain constant until the lease comes to an end. The landlord cannot change the rates mid-term.
Set Lease Terms
The lease conditions and rules remain the same until the lease ends. What was initially stated in the apartment lease is what both the tenant and landlord must abide by. However, the rules and terms must comply with state laws. For the rules to change during the lease, the landlord must provide the tenant with at least a 30-day notice.
A tenant is required to submit their monthly rent throughout the lease period. The apartment lease agreement prohibits the tenant from moving out mid-term unless they agree with the landlord.
The landlord cannot force a tenant out unless they agree to it or the tenant violates something within the lease that subject them to eviction. Both parties must uphold the conditions stated in the agreement.
High Renewal Rates
Even though your rental lease rate for a fixed lease remains the same until the lease ends, landlords normally reevaluate the rates and pair a renewal with a rent increase. This is totally different from a month-to-month lease, where a tenant does not have a set lease end date. For the case of a month-to-month lease, tenants might live for long periods without a rent increase, or they could experience rent increases much more frequently.
You Cannot Relocate without Penalty if Situations Change
There are times when a tenant experiences a life change that forces them to relocate, even before the lease ends. This could be due to a family emergency, medical emergency, breakup, job loss, or a job opportunity in a different location.
For the tenant to be allowed to relocate before the lease expires, they must pay a lease-breaking fee. Learn how to break a lease without penalty here.
Forced to Live in Unfriendly Conditions
Whether you are a landlord or tenant, there are always personalities that clash. For instance, you might fail to get along with your neighbors or landlord if you rent a new apartment.
Since personality clashes are not legitimate grounds to break a lease, you will be forced to live in such an uncomfortable environment until the lease ends. The same applies to a landlord who finds themselves with a rude, overbearing, or annoying tenant. Learn how to deal with noisy apartment neighbors here.
This lease is also known as a periodic lease. The periodic lease offers both the landlord and tenant the opportunity to cancel the lease at any time with proper notice, without penalties.
The lease outlines what constitutes proper notice and how far in advance you should notify your landlord. Your landlord should also follow the outlines while increasing rent.
For your information, the amount of notice required to end the tenancy or change a lease term is decided by the local or state laws. In most cases, it is 30–60 days.
Changing Lease Terms is Easy
To either increase the rent or change lease terms, the property management should follow local and state laws for providing proper notice. Some things that might force the landlord to change leasing terms include adding maintenance requirements and updating a pet policy.
Most local and state laws require a 30–60 days notice before updates are made to the lease. Sometimes, proper notice requirements are different, especially if the lease updates include a rental increase.
Easy to Move
If the landlord wants the tenants out of what is an apartment or if the tenant wants to move out, renting with month-to-month leases offer an easy process. For instance, all the tenant needs to do is notify the property management that they seek to vacate the furnished apartment building on a certain date.
When the tenancy ends mid-month, the tenant might have to pay a prorated rent amount provided for by the lease or agreed upon by the property management. The amount of notice required should abide by state laws. Learn about what is prorated rent here.
If the landlord wants their tenant to exit the furnished apartment, they must abide by the state laws for a no-cause eviction. This is not really an eviction, but rather a notice to vacate the apartment on a specific date even when the tenant has done nothing wrong. Some local or state laws actually set limitations or prohibit no-cause evictions.
Unplanned Vacancy Risk
It gives the tenants an option of moving out any time they want. Even though this flexibility is good for the tenant, it is not ideal for the landlord.
Dealing with an abrupt vacancy can eat into the tenant’s cash flow, especially when it happens during winter. In the winter, not many people are involved in the apartment search process making it difficult to find a replacement. This is why landlords prefer having tenants on term leases, and make the rent much higher if a tenant decides to go month-to-month.
We all know that rental rates are increasing all the time. In most cases, the month-to-month renters feel the biggest impact from such increases.
While most state and local laws specify the amount of notice the property manager should give before initiating a rental increase, few state and local laws have a cap on the number of times and the amount of rent that can be increased per year. You may be surprised to find some landlords taking advantage and implementing a 25% rental increase.
This lease option only applies if you intend to sublet your unit to another person during the tenancy period. The landlord agrees that a different tenant other than the one on the lease originally will be living in their apartment. Under this arrangement, the new tenant is responsible for maintaining the unit and paying rent.
However, as a tenant, you can only sublet if your original lease allows for it. You should also clear it with your respective landlord first.
To some extent, the original tenant is responsible for ensuring that rent is paid on time. They also need to ensure that the new tenant keeps the unit in good shape.
- A sublease agreement provides for the flexibility of short lease terms. In most cases, sublease apartment agreements provide under market rent. As we said, the original tenant is still responsible for the lease even after subleasing. Since a tenant in this situation might not be in need of space, they might be willing to sublease the unit for less to offset the ongoing cost.
- You can easily qualify for a sublease since it requires less or no corporate and personal guarantee.
- You will only get what the original tenants signed for in their lease. For instance, if you want a different property-use type, a long-term lease, parking, etc, The original tenant will not be able to provide it if it’s not available in the original lease.
- It is impossible to acquire the rights to extend the current lease term from the existing term. Since the original tenant is still responsible, they will be reluctant to offer options in addition to the current terms, even when renewal options are available.
- The original tenant might fail or not be willing to provide enough tenant improvement allowance. If you require improvements, such as adjusting the wall paint, you might be forced to pay for everything.
- A sublease agreement is subject to the original tenant not defaulting on their part. You can get a notice of lease termination on grounds that the original tenant defaulted. You will then be forced to either vacate or pay off the remaining balance in such a situation.
Lease Options when Renting an Apartment with a Roommate
Are you planning to have a roommate in your apartment? If yes, there are several lease options to consider within the broader residential lease types mentioned above.
This is a co-tenancy option where you and your potential roommates have equal responsibility for abiding by the lease conditions while occupying the unit. In this case, if one roommate fails to honor their lease, the other roommate steps in to save the situation. This might include paying their rent portion.
We recommend choosing a roommate with a good credit history and rental history. This is evidence enough that they will pay rent on time and without fail.
This is sometimes referred to as by-the-bedroom leasing. Each roommate becomes responsible for their space and its associated terms in this leasing option. The advantage of this option is that you won’t be liable for your roommate’s actions.
The roommate you sign with will mainly depend on what your property manager or landlord allows. In situations where there are two or three roommates, joint leasing would be the most viable option. For the case of college rentals or larger units, individual leasing is recommended.
Nowadays, most furnished apartments or unfurnished apartments make it mandatory to sign a lease agreement before you rent a unit. This is precisely why we recommend understanding the different residential lease types and their associated terms.
Remember, the lease type you sign will depend on what the property management company or landlord allows. Depending on your needs, feel free to select a fixed-term lease, month-to-month lease, or sublease agreement.
Ensure that you abide by the lease agreement that you sign to avoid trouble with your landlord. If you decide to sign a sublease joint or individual leasing agreement, choose someone who will not default on their portion of the rent.