Lease terms in plain English.
Each term in two sentences, then an example with real numbers, how it reads in a lease, and the tool that puts it to work.
A
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Abandonment
Abandonment is when a tenant leaves a rental before the lease ends, without notice and without intending to return, usually with rent unpaid.
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Automatic renewal clause
An automatic renewal clause renews a lease for another term unless one side gives notice by a deadline before the lease ends.
C
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Cap rate
Cap rate, short for capitalization rate, is a property’s yearly net operating income divided by its price or value, shown as a percentage.
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Cash for keys
Cash for keys is an agreement in which a landlord pays a tenant to move out by a set date and leave the unit in agreed condition, instead of going through an eviction.
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Cash-on-cash return
Cash-on-cash return is a rental property’s yearly pre-tax cash flow divided by the cash the investor actually put in.
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Constructive eviction
Constructive eviction happens when a landlord’s actions, or failure to act, make a rental so unlivable that the tenant is effectively forced out, even though no one told them to leave.
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Cosigner
A cosigner is a person who signs the lease alongside the tenant and becomes equally responsible for the rent and every other lease obligation.
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Cure-or-quit notice
A cure-or-quit notice tells a tenant who has broken a lease rule, other than paying rent, to fix the problem within a set time or move out.
E
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Early termination clause
An early termination clause is a lease term that lets a tenant, and sometimes the landlord, end a fixed-term lease before its end date by giving notice and, usually, paying a set fee.
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Escalation clause
An escalation clause is a lease term that raises the rent automatically on set dates, by a fixed amount, a fixed percentage, or an index such as the Consumer Price Index.
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Eviction
An eviction is the court process a landlord must use to remove a tenant and take back possession of a rental.
F
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Fixed-term lease
A fixed-term lease is a lease with set start and end dates, most often 12 months, during which the rent and terms are locked unless the lease itself allows a change.
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Forwarding address
A forwarding address is the mailing address a tenant gives the landlord, in writing, for the security deposit refund and any itemized statement after move-out.
G
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Grace period
A grace period is the number of days after rent is due during which the tenant can still pay without a late fee.
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Gross lease
A gross lease is a lease in which the tenant pays one fixed rent and the landlord pays the property’s operating costs, such as taxes, insurance and maintenance, out of it.
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Gross rent multiplier (GRM)
The gross rent multiplier, or GRM, is a property’s price divided by its gross yearly rent.
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Ground lease
A ground lease is a long-term lease of land only, often 50 to 99 years, under which the tenant builds on or uses the land while the landowner keeps ownership of it.
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Guarantor
A guarantor is a person who signs a promise to pay a tenant’s rent and other lease debts if the tenant does not.
H
I
J
L
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Last month’s rent
Last month’s rent is rent for the final month of a tenancy that a landlord collects in advance, at move-in, and applies to that last month.
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Late fee
A late fee is a charge the lease allows a landlord to add when rent is not paid by the due date plus any grace period.
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Lease addendum
A lease addendum is a separate, signed document that adds terms to a lease or changes existing ones, and becomes part of the lease once both sides sign it.
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Lease assignment
A lease assignment transfers a tenant’s whole remaining interest in a lease to a new tenant, who steps into the original tenant’s place and deals directly with the landlord.
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Lease renewal
A lease renewal continues a tenancy for a new term after the current lease ends, by signing a new lease or a renewal addendum, or through an automatic renewal clause.
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Leasehold
A leasehold is the right to occupy and use land or a building for a fixed period under a lease, while someone else owns it outright.
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Lessee
A lessee is the party who receives the right to use a property under a lease and pays for that use, usually as rent.
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Lessor
A lessor is the party who grants a lease: the owner of a property, or someone with the owner’s authority, who lets another person use it in exchange for rent.
M
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Month-to-month tenancy
A month-to-month tenancy is a rental with no fixed end date that renews itself each month until the landlord or the tenant gives written notice to end it.
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Move-in inspection
A move-in inspection is a walk-through of a rental at the start of a tenancy to record its condition, usually on a signed checklist with dated photos.
N
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Net operating income (NOI)
Net operating income, or NOI, is a rental property’s yearly income after vacancy and operating expenses, but before mortgage payments, depreciation and income tax.
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Normal wear and tear
Normal wear and tear is the gradual decline a rental goes through from ordinary, careful use over time, such as faded paint, minor scuffs and carpet worn in walkways.
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Notice to quit
A notice to quit is a landlord’s formal written notice telling a tenant to leave by a certain date, the step most states require before an eviction case can be filed.
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Notice to vacate
A notice to vacate is a written notice from a landlord or a tenant saying the tenant will leave, or must leave, the rental by a stated date.
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NSF (non-sufficient funds)
NSF, short for non-sufficient funds, means a bank refused a check or electronic payment because the account did not have enough money to cover it.
O
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Occupancy limit
An occupancy limit is the maximum number of people allowed to live in a rental, set by the lease, a local housing code, or both.
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One percent rule
The one percent rule is a rule of thumb that a rental’s monthly rent should be at least 1% of its purchase price for the deal to deserve a closer look.
P
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Pay-or-quit notice
A pay-or-quit notice is a landlord’s written demand that a tenant pay the overdue rent within a set number of days or move out.
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Payment reversal
A payment reversal is a rent payment pulled back after it looked complete, because of insufficient funds, a closed account, a bank error or a disputed charge.
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Periodic tenancy
A periodic tenancy is a tenancy that runs one rental period at a time, such as week to week or month to month, and renews itself until one side gives proper notice.
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Pet deposit
A pet deposit is a refundable amount a landlord collects to cover damage a pet may cause, returned at move-out like a security deposit.
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Property manager
A property manager is a person or company hired by an owner to run a rental day to day: finding and screening tenants, collecting rent, handling repairs and following landlord-tenant law.
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Prorated rent
Prorated rent is rent charged for only part of a rental period, usually a partial first or last month, worked out from a daily rate.
Q
R
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Rent concession
A rent concession is a discount a landlord offers to win or keep a tenant, such as a free month, reduced rent for the first months, or waived fees.
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Rent control
Rent control is a law that limits how much, and how often, a landlord can raise the rent on an existing unit.
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Rent escrow
Rent escrow lets a tenant pay rent into a court or an escrow account, instead of to the landlord, while serious repair problems go unfixed.
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Rent roll
A rent roll is a list of every unit in a rental property with its tenant, rent, lease dates, deposit and any balance owed.
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Rent stabilization
Rent stabilization is a form of rent regulation that allows increases each year but limits them to a set percentage and usually gives tenants a right to renew.
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Rent-to-own
Rent-to-own is an arrangement in which a tenant rents a home with the option, or the obligation, to buy it later, usually at a price set at the start.
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Right of entry
Right of entry is a landlord’s right to go into a rented unit for set purposes, such as repairs, inspections and showings, usually after giving the tenant advance notice.
S
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Security deposit
A security deposit is money a tenant pays at the start of a lease that the landlord holds to cover unpaid rent or damage beyond normal wear and tear.
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Self-help eviction
A self-help eviction is any attempt by a landlord to force a tenant out without a court order, such as changing the locks, removing the tenant’s belongings or shutting off utilities.
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Small claims court
Small claims court is a simplified court for money disputes under a set dollar limit, where people usually represent themselves without a lawyer.
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Sublease
A sublease is an arrangement in which a tenant rents all or part of their place to someone else, called a subtenant, while staying on the original lease.
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Surrender
Surrender is the ending of a lease before its term by agreement between landlord and tenant, with the tenant giving up possession and the landlord accepting it.
T
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Tenancy at sufferance
A tenancy at sufferance exists when a tenant who once had the right to be in the unit stays on after that right has ended, without the landlord’s agreement.
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Tenancy at will
A tenancy at will is an arrangement in which someone lives in a property with the owner’s permission but without a lease or fixed term, and either side can end it with notice.
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Triple net lease (NNN)
A triple net lease, or NNN lease, is a lease in which the tenant pays base rent plus the property’s three main operating costs: property taxes, building insurance and maintenance.
U
W
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