Why You Need a Lease Agreement

A signed lease protects your rights.

A lease agreement is a contract that defines the rights and liabilities of the parties that sign it. Leases usually involve the limited use of tangible goods or real property for a specified period. Commonly leased items consist of commercial and residential real estate, vehicles, furniture and office equipment. Leases can be executed by virtually anyone from private individuals to large corporations. Therefore, you should get an agreement in writing to avoid unnecessary exposure to liability.

Consideration and Price

When most people think about what is contained in a contract or, more specifically, a lease agreement, consideration or price is usually the first thing that comes to mind. This is because "consideration" or a "detrimental exchange" is one of the essential elements of contract formation. If an oral agreement is formed before consideration is exchanged, it may be difficult or impossible to prove that a contract existed if one party attempts to back out.

Length of Lease Term

Leasing is a practice that allows one party to use the property of another for a definite period. For example, most residential leases can last anywhere from a few days to several years. It is important that both parties understand the length of the lease. From the perspective of a lessor (the person leasing property), getting length provisions in writing will help you avoid any disputes over the length of use and create a smooth transition of property back to its original owner at the end of the lease term. From the lessee's point of view, a written lease agreement protects your interests by preventing a landlord from evicting you from property you have a legal right to occupy.

Terms of Use

Having terms of use in writing is especially important for a lessor. When a lessor allows another person to use her property, she may want to restrict the way it's used. For instance, a landlord may want to restrict a tenant from making any major changes to a leased apartment such as adding or removing appliances. If the terms of use are in writing and the lessee violates them, the lessor can collect damages from the lessee. If there is no written lease agreement, the lessor may not be able to prove terms of use existed and will be unable to collect after a violation.

Designation of Liability

A lease agreement is useful for assigning liability among the parties for certain events. For instance, it would help sort out who would bear the cost of a tenant's personal property damage if an arsonist set fire to an apartment building. When events occur that are beyond the control of either party, it is important to have an agreement in place that assigns liability to one party or another for specific events. If no written lease agreement is in place, liability disputes could cost both parties much more in the long run, especially if they are litigated.

Statute of Frauds

A concept in the law called the statute of frauds states that certain agreements must be in writing to be enforceable. One statute of frauds classification involves contacts that cannot be completed within one year. If you have entered into an oral lease contract for a year or more, it must be in writing or a court will not enforce it. If a dispute arises between the lessor and lessee, they are both out of luck. For this reason, always get agreements in writing.

References

• Findlaw: Whether to Use a Lease or Rental Agreement