Thursday, February 11, 2010

A lease isn't a lease

I drove my mother to the airport 2 days ago and somehow she thought our hour trip to Kennedy was a legal consultation. My step-father has been running her building for a long time as the property manager, but now she wanted answers. My mother now wanted to know everything and every choice she had with respect to her property. Wow did the questions come, but interestingly they were really good questions.

Here was my overall answer: A lease is a contract that can contain anything that the landlord and tenant agree upon. There is almost no issue that can't be addressed. As an attorney, I must warn you that there are certain laws that can't be superseded by a lease - so pay attention to Federal, State, and Local laws when drafting, but don't let that stop you from being creative.

My mother's first question was if I had a form that she could look at, which is where I typically start with everyone - they all want a form. Let me be crystal clear, if you want a form lease, stop reading now, you are wasting both of our time. Don't get me wrong, I am not against forms, but they should just be a starting place. After that, you must determine many issues that will be addressed in my next blog. Yet, for now lets discuss what minimum requirements there are for a lease to be valid.

A lease is a contract that deals with land, so the Statute of Frauds requires it to be in writing and signed by the parties to be bound (in English, both the landlord and tenant must sign the lease). Moreover, a contract has 4 required elements to be enforceable, including:
1. It must have a definite term - meaning that its length must be clearly articulated;
2. It must be offered by the landlord;
3. It must be accepted by the tenant; and
4. It must have mutual consideration (in English, both the landlord and the tenant must give up something whether money or the ability to stay at a location).

Now that you have the basics, start thinking about things you would want in a lease if you were a landlord (the topic of discussion for tomorrow). Would you want a monthly lease, an annual lease, a multi-year lease? Would you want a right of entry? How much money would you want? Would you want an automatic increase in rent every year? Would you want a security deposit & how much? Would you want key money (in English - bribery money to get the lease in the first place)? Would you want someone to guarantee that the tenant will pay? What about the utilities, should the tenant pay them? There are so many questions, so start thinking and I will put together a list tomorrow and talk about some of the answers.