## What Is a Lease?

Leases are a cornerstone of property rental agreements, defining the relationship between the tenant ([lessee](https://www.investopedia.com/terms/l/lessee.asp)) and the landlord ([lessor](https://www.investopedia.com/terms/l/lessor.asp)). These legally binding contracts outline the conditions under which one party agrees to rent a property from another. In exchange, the lessee is granted access to the property, while the lessor receives regular payments for a specified duration. If either party fails to meet the obligations, legal consequences may arise. A lease is a form of [incorporeal right](https://www.investopedia.com/terms/i/incorporeal-rights.asp).

### Key Takeaways

*   A lease is a legal, binding contract outlining the terms under which one party agrees to rent property owned by another party.
*   It guarantees the tenant or lessee use of the property and, in exchange, regular payments for a specified period to the property owner or landlord. 
*   Residential leases tend to be the same for all tenants, but several commercial leases exist.
*   Consequences for breaking leases range from mild to damaging, depending on the circumstances under which they are broken.
*   Certain protected groups can vacate their leases without any consequences, but proof is usually required.

![Lease](https://www.investopedia.com/thmb/Hgma83m-N2qTw5KfPWP8Nehi2a8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/lease-Final-743e923121a7434380d61e3f1c90a6d1.jpg)

*— Investopedia / Julie Bang*

## Understanding a Lease

Leases are legal and binding contracts that set forth the terms of rental agreements in [real estate](https://www.investopedia.com/terms/r/realestate.asp) and real and personal property. The contract specifies the amount of rent, the duration of the lease, the responsibilities of both parties and the consequences of breaching the agreement. For example, a residential lease typically includes:

*   The property address
*   Landlord and tenant responsibilities
*   The rent amount
*   [Security deposit](https://www.investopedia.com/terms/s/security-deposit.asp)
*   Rent due date
*   Consequences for [breach of contract](https://www.investopedia.com/terms/b/breach-of-contract.asp)
*   Lease duration
*   Pet policies

Not all leases are designed the same, but they have some common features. These include the rent amount, the due date of rent, and the expiration date of the lease. The [landlord](https://www.investopedia.com/terms/l/landlord.asp) requires the tenant to sign the lease, thereby agreeing to its terms before occupying the property. 

Most residential leases are standard, with the same terms for all tenants. Leases for [commercial properties](https://www.investopedia.com/terms/c/commercial-property.asp), on the other hand, are usually negotiated in accordance with the specific lessee and typically run from one to 10 years. Larger tenants often have longer, complex lease agreements.

> **Important**
>
> The landlord and tenant should retain a copy of the lease for their records. This is especially helpful if and when any disputes arise.

## Special Considerations

The consequences of breaking leases range from mild to damaging, depending on the circumstances under which they are broken. A tenant who breaks a lease without prior negotiation with the landlord faces a civil lawsuit, a derogatory mark on their [credit report](https://www.investopedia.com/terms/c/creditreport.asp), or both. As a result of breaking a lease, a tenant may encounter problems renting a new residence and other issues associated with having negative entries on a credit report.

Tenants who need to break their leases must often [negotiate](https://www.investopedia.com/terms/n/negotiation.asp) with their landlords or seek legal counsel. In some cases, giving a certain amount of notice or forfeiting the security deposit allows tenants to break their leases with no further consequences.

Some leases have early termination clauses that allow tenants to terminate the contracts under specific conditions (job-related relocation, divorce-induced hardship) or when their landlords do not fulfill their contractual obligations. For example, a tenant may [terminate a lease](https://www.investopedia.com/terms/d/deed-of-surrender.asp) if the landlord does not make timely repairs to the property.

The terms of a lease [cannot violate state or federal law](https://www.investopedia.com/articles/personal-finance/061515/4-things-landlords-are-not-allowed-do.asp). So a clause that allows a landlord to enter the premises at any time without notice or one that, via court action, grants a landlord to recover more than statutory limits allow is not enforceable.

> **Warning**
>
> Discrimination during the rental process is illegal. If you think you’ve been discriminated against in the course of your search or application, based on your race, religion, sex, marital status, national origin, disability, or age, there are steps you can take—such as filing a complaint with the U.S. Department of Housing and Urban Development's (HUD) Office of Fair Housing and Equal Opportunity.

### Protected Groups

Certain groups of people have more leeway in ending leases early. Chief among these are members of the military. Under the [Servicemembers Civil Relief Act](https://www.investopedia.com/servicemembers-civil-relief-act-scra-5192850), they can break their leases if they receive active-duty orders, requiring them to relocate for more than 90 days.

Many states allow domestic violence victims to break leases without negative consequences. The abuse must have been fairly recent (typically within the last year) and the tenant usually should show some form of proof, such as a court order of protection or a police report documenting the violence.

Some states allow renters, especially older adults, to terminate a lease early due to disability, health conditions, or medical crises that make living in the current home untenable. A letter from a local doctor, hospital, or other medical professional attesting to the health condition is usually required.

Even with these protections, a written notice to the landlord, typically 30 days in advance, is still required.

## Types of Leases

Beyond residential leases, tenants who lease commercial properties have a variety of lease types available, all of which are structured to assign more responsibility on the tenant and provide greater up-front profit for the landlord.

Some commercial leases require the tenant to pay rent plus the landlord's operational costs, while others require tenants to pay rent plus [property taxes](https://www.investopedia.com/terms/p/propertytax.asp) and insurance. The four most common types of commercial real estate leases include:

*   [Single-Net Leases](https://www.investopedia.com/terms/n/net-lease.asp): In this kind of lease, the tenant is responsible for paying property taxes.
*   Double-Net Leases: These leases make a tenant responsible for property taxes and insurance.
*   Triple-Net Leases: Tenants who sign these leases pay property taxes, insurance, and maintenance costs.
*   [Gross Leases](https://www.investopedia.com/terms/g/gross-lease.asp): Tenants pay rent while the landlord is responsible for other costs. 

## How Do Leases Work?

Leases are generally legally binding contracts between the lessor and the lessee. They involve a piece of property rented out by the owner (lessor) to the tenant (lessee). Leases can be verbal agreements but are usually drawn up in writing. Both parties agree to the terms of the lease, including the rental amount, length of time for the contract, as well as any consequences that may result if either party doesn't uphold the terms and conditions of the contract.

## What Benefits Do Leases Provide for Landlords and Tenants?

A lease benefits both parties by providing a clear framework for the rental relationship. For landlords, a lease ensures regular income and protects their property. For tenants, a lease offers legal assurance regarding their rights to occupy the property and provides transparency on their responsibilities. It also outlines the penalties for breaking the lease, ensuring both parties understand the consequences of non-compliance.

## Can You Break a Lease?

Breaking a lease should be a last resort, as there may be legal or financial consequences. Tenants may be required to pay penalties or the remaining balance on the lease. Breaking the lease can sometimes negatively impact a tenant's [credit score](https://www.investopedia.com/terms/c/credit_score.asp). Landlords may also face challenges if they break the lease, including providing alternate accommodations or dealing with legal disputes.

However, tenants and landlords can often resolve issues amicably through communication. If either party faces circumstances that necessitate breaking the lease, it’s advisable to negotiate the terms and explore options to avoid unnecessary penalties.  

## The Bottom Line

Leases play a pivotal role in establishing clear, enforceable rental agreements. Both landlords and tenants benefit from having a defined framework for the rental process. While breaking a lease can lead to negative consequences, certain groups are protected by law, allowing for more flexibility. Whether you are renting residential or commercial property, understanding your lease terms and responsibilities is crucial to maintaining a successful rental arrangement.  

> **Article Sources**
>
> 1.  U.S. Department of Housing and Urban Development. "[Complaints](https://www.hud.gov/faqs/complaints)."
>     
> 2.  United States Department of Justice. "[The Servicemembers Civil Relief Act (SCRA)](https://www.justice.gov/servicemembers/servicemembers-civil-relief-act-scra)."
>     
> 3.  United States Department of Justice. "[Servicemembers Civil Relief Act (SCRA) Questions and Answers for Servicemembers](https://www.justice.gov/sites/default/files/crt/legacy/2012/09/11/scra_qa_5-26-11.pdf)," Page 2.
>     
> 4.  National Housing Law Project. "[Housing Rights of Domestic Violence Survivors: A State and Local Law Compendium](https://www.nhlp.org/wp-content/uploads/2018/07/2017-DV-State-and-Local-Housing-Laws-Compendium.pdf)," Page 9.