10 Lease Provisions That Can Protect Your Business

When writing a lease agreement, it is essential that you include clauses to protect yourself in the event that your tenant breaches the rules stated on this agreement. However, this can quickly become overwhelming as there are a number of laws in place in New York City that you must follow when creating lease agreements. It can be easy to forget about one or miss a step, but this can lead to serious problems with tenants in the future if you are not careful.

When creating a lease agreement, the basic requirements are that it must include:

• The type of property

• Contact information of all parties involved

• The beginning and expiration date of the lease

• Rent amount, due date, and late fees (if applicable)

• “Holding Over” conditions and penalties

In addition to these requirements, landlords also include clauses in their lease to further protect themselves, list rules the tenant is expected to follow, and clearly lay out the responsibilities of both you and the tenant.

There are a number of lease clauses a landlord can include, but here is a list of some that are essential in order to protect yourself:

1. Severability Clause

A severability clause states that if any part of the signed lease is determined to be non-applicable by the court, then the remainder of the lease agreement will remain valid. Without this clause, you are susceptible to having your entire lease agreement invalidated by the court.

2. Rent Liability Clause

A rent liability clause states that the given tenants have full responsibility of paying the rent in full, even if one party (if applicable) is unable to pay their portion of the rent. For example, if a tenant chooses to live with a roommate, and that roommate is unable to pay their portion of the rent, the tenant is still obligated to pay you the full amount of rent. Any complications with roommates being unable to pay rent must be resolved, however including this clause ensures that you always get paid in full regardless of the situation.

3. The Right To Entry

When you sign a lease agreement, you are giving the tenant possession of your property. This means you no longer have the right to enter and exit the unit as you please, however you may need access to the unit in the event of an emergency, such as a fire or if a repair needs to be done.

For this reason, you must include a clause that specifies under what circumstances you are given the right to enter the unit, such as for a property inspection, repairs, or an emergency. It must also mention how much of a notice tenants can expect to receive before you enter the unit. It may also be helpful to set a limit as to when in the day you are allowed to schedule a visit, such as during the hours of 9am-6pm.

4. Rent Due Dates And Late Fees

When including a clause about rent due dates and late fees, it is important to be as clear and concise as possible. In this clause, you should include the due date for rent each month, the grace period (if applicable) for late payments, and the penalty tenants will face for making any late payments.

Without this clause, you may run into issues with tenants not being timely in their payment of rent. Seeing as rent payments are what allows your business to stay afloat, it is essential that you are getting paid consistently and in a timely manner.

5. Renewal And Holding Over

A renewal clause states that a tenant must give you a written notice as to whether they intend to renew their lease or vacate the unit. This notice must be given anywhere from 30 to 60 days prior to the expiration of their lease.

With this 30 to 60 day notice, you are given sufficient time to begin searching for a new tenant if the original tenant intends on vacating the unit. If the tenant does not give you the proper notice, the clause should also state that they will be liable for the rent of the unit for the extra days it takes for them to move out.

6. Lease Termination Clause

A lease termination clause must state that both parties have the right to terminate the lease prior to its expiration if necessary. This, however, is different from early termination. In early termination, the landlord decides to end the lease agreement due to the tenant breaking a term of this lease. However, lease termination implies that both the landlord and the tenant have consented to this termination.

In a lease termination, the landlord agrees to release the tenant from their obligations and the tenant agrees to vacate the unit. However, you may still be able to charge an extra rent amount or an extra fee for this termination.

7. Security Deposit Clause

The security deposit clause will first state the specified amount of the deposit. This amount should be agreed upon by both the tenant and the landlord before signing the lease agreement. It should also include where the security deposit will be held and when you will be returning it to the tenant. You must also specify how the deposit may be used to cover specified damage, repairs, or unpaid rent.

8. Consumer Price Index Rent Increase Clause

A CPI rent increase clause states that the landlord has the ability to tie the rent amount to the consumer price index, also known as the CPI. This means that the landlord is able to increase the rent during lease renewal time according to the percentage increase of the CPI over the past year.

This clause ensures that the property’s rent is able to keep up with inflation, which will allow you to stay in business. It also helps to increase the property’s market value, which can be helpful if you decide to sell the property.

9. Sublet Rules Clause

In your lease agreement, you must specify your terms for subleasing. If you do not want your tenants to sublet their unit, then you have the right to state this in the lease agreement. Otherwise, tenants are able to sublet their unit without your permission.

If you want to allow tenants to sublease their unit, then you must include rules and regulations in the lease agreement for this process. For example, you may want to include rules in regards to who they are allowed to sublease to, how they must notify you, what the minimum stay must be, and if they must submit a formal application that must be approved.

10. Cleaning Clause

This clause refers to the tenant’s responsibility to keep their unit as well as common spaces in a clean, habitable condition during their tenancy. It also states that the tenant is expected to return the unit both clean and undamaged, aside from the expected wear and tear, at the end of their lease. Failure to do so will result in a deduction from their security deposit or an additional rent payment in order to cover any cleaning costs.

Not Sure If Your Leases Will Protect You? Contact Outerbridge Law

The vast majority of tenants you’ll rent to in your time as a landlord will adhere to all the rules in your lease and leave you property in great shape. However, everyone will experience a tenant who thinks the rules don’t apply to them. In situations like these, it’s vital that your lease agreements include the relevant clauses that will protect your business.

If you’re not sure if your leases will provide the protection your business needs, contact Outerbridge Law today to schedule an initial consultation with our experienced landlord tenant team.