Elements of a lease

Leases can be intimidating to prospective residents and difficult administratively for managers
and leasing agents. Nevertheless, they are a necessary part of the rental process. With that in
mind, knowing what the elements of the lease are and understanding the purpose of the elements
is an important part of the rental management process.

Element #1 - Parties to the Agreement

The lease contract will identify the owner, the management company if there is one, and then the
lessor. The identification will the formal legal name of each and their address.

Element #2 - identification of the Premises

This will include the name, address, phone number, and zip code of the property and the unit
assigned to the lessor (the resident executing the lease).

Element #3 - Rent

This will describe the amount of the rent, when the rent is due, and when the rent becomes late.
This will also outline the specific payment terms if the rent is late.

Element #4 - Term

This section will include the beginning date of the lease, when the lease will expire, and the
terms if the resident does not vacate at the term. Often times, the rate will convert to a month to
month amount at an increased price. This section also will describe the requirements for
termination, results if the resident must terminate early, and other relevant requirements.

Element #5 - Acknowledgment of Security Deposit

The lease describes the amount of the security deposit being held and the requirements for the
refunding the deposit. The lessor's legal rights to the deposit amount and the disposition of any
interest earned on the security deposit. Normally, security deposit does not draw any interest.
Also, the lease will explain the requirement to return the deposit and in what time frame.

Element #5 - Special Clauses and Addendums

These often include items like death clauses, military member rights, home purchase clauses,
loss of employment clauses, pet addendums and alternative service items. Other clauses include,
condition of premises, use clauses, subleasing clauses, limitations, repair and break down,
eviction, right of re-entry, repossession, abandonment, waivers, exculpation, assignment,
subordination, fire and casualty, bankruptcy, rules and regulations, condemnation and eminent
domain. Also, arbitration and indemnification may be included.

Your typical lease agreement will include the 5 elements listed above. The object of these
clauses are to protect the property, the owner, the manager, and the renter. However, because the
lease is prepared on the owners behalf the owner is the favored party in most leases. Owners are
well advised to use a professionally prepared legally binding lease contract.

Basic requirements for a lease

The three essential elements of a lease
The lease has been defined as ‘the grant of a right to the exclusive possession of land for a
determinate term less than that which the grantor himself has in the land.’ This definition
identifies three essential elements:

1. Exclusive possession
2. Determinate term
3. Term less than that of grantor 

Exclusive possession

Exclusive possession is an essential ingredient of a lease; without exclusive possession there can
be no lease. Exclusive possession is the right to use premises to the exclusion of all others,
including the landlord himself.

If the occupier has no right to exclusive possession of the premises then his right to use the
premises cannot amount to a lease, but may be some lesser right, such as a licence or possibly an
easement. However the fact that a person had been given exclusive possession is not conclusive
proof that he has a lease, for it is also possible to have a licence or certain other rights in land,
without exclusive possession.

It should be noted that although exclusive possession normally gives the tenant the right to
exclude everyone else, including the landlord, from the premises, the lease may reserve the right
for the landlord to enter the premises on certain occasions, eg, to inspect the state of repair of the
property. Such a right must be exercised at reasonable hours and in a reasonable manner and
does not prevent the tenant having exclusive possession, though a right for the landlord to come
and go as he pleases without the tenant’s permission would have this effect. Thus in Appah v
Parncliffe Investments Ltd [1964] 1WLR 1064, in which the ‘landlord’ had reserved the right to
come into the premises as and when he chose in order to empty meters and change linen, the
arrangement was held to be a licence, since the occupier did not have exclusive possession.

Determinate term
The commencement of the period must be certain in a lease. Normally, if no mention is made in
the agreement, it will be deemed to start immediately (Furness v Bond (1888) 4 TLR 457). If
however, one has only an agreement for a future lease, it will be void unless it is clear at what
date the lease is to start, either from an express term in the contract or by inference (Harvey v
Pratt [1965] 1 WLR 1025).

It is not infrequently the case that a landlord will nonetheless wish to permit the use of his
property for an uncertain period. This was the position with wartime lettings, where leases were
made ‘for the duration of the war’ but were held to be invalid because they did not create a term
for a certain period. (Lace V Chantler [1944] KB 368).  More recent cases have involved owners
who intend to develop their land at some future date, and so want to avoid creating leases for
fixed periods which might delay them when they are ready to start work. For a time it was
thought that this could be achieved by creating a periodic tenancy with a provision that the
landlord would not give notice to quit until he was ready to redevelop the land. This gave the
tenant some measure of security, but enabled the landlord to regain possession when needed. 

There are however, ways of satisfying the parties’ wish to avoid being held to a fixed period. A
lease may be granted for a certain term but with a provision for earlier determination on the
occurrence of a certain event. Thus during the war a lease could have been granted for 10 years
with a provision for determination if the war ended earlier, and this would satisfy the rule in
Lace v Chantler. It is also acceptable for a period tenancy to restrict the landlord’s right to give
notice, unless for a specified purpose, during a prescribed period.

The requirement that the maximum duration of the lease must be certain means that the grant of
a lease ‘for T’s life’ or ‘until T marries’ would not under the general rules be capable of
amounting to a legal estate, because it is not granted for a certain period. However, it used to be
not uncommon for such leases to be granted and therefore the draftsmen of the property
legislation provided a saving provision for such cases. 

Term less than that of grantor

An owner in fee simple is able to grant a lease of his property for any term because the fee
simple is itself effectively perpetual. Thus there is nothing to prevent a fee simple owner granting
a lease to a tenant for 9,000 years. In fact 99-year leases are common and 999-year leases,
though hardly frequent, are to be found in practice.

Whilst there can only be one fee simple estate in one piece of land, there can be more than one
term of years. A tenant may himself grant a lease of the premises (a sublease) to a subtenant, as
long as this sublease will last for a shorter period than the original lease (the head lease). The
subtenant may also grant a further lease of the same premises (an under lease) to an undertenant,
as long as the under-lease is for a shorter period than the sublease. Thus if L, the fee simple
owner, grants T a 99-year lease of a property on 1 January 1980, T may grant a sublease to S for
any shorter period (e.g. 25 years) and S may grant an under lease to U for any period shorter than
the sublease (e.g. a monthly tenancy).