We’ve talked about why leasing may not be a bad option but, when presented with an opportunity to enter into a lease, what do you need to include in the lease?
First, you need the names of the lessor (landlord) and lessee (tenant). Make sure you have the correct lessor and lessee. The land may be in a trust, which means the trustee of the trust must sign the lease. You may have a limited liability company, meaning you sign on behalf of the LLC.
Second, you need a description of the property to be leased. This is ideally the legal description of the real estate. If you are going to lease buildings, such as a barn or residence, also include that in the lease.
Third, you need to memorialize the rental price. How much is rent and how will it be paid? Will you pay a graduated rent (rent increasing every year of the lease to a set amount) or will you pay a share of the crops grown? Will rent be paid monthly, quarterly, yearly, or some other schedule? Should rent be mailed to the landlord at a specified address or can rent be paid when in person?
Fourth, you need a term for the lease, or how long it will be in effect. Is this a one-year lease? Two-year lease? Five-year lease? Is it a lease that renews automatically every year unless one party takes action to terminate the lease?
Fifth, each party to the lease needs to sign it. This is such an obvious step that it is easy to overlook it.
Finally, remember the statute of frauds. If you enter into a lease that is over one year, the lease must be in writing. If you enter into a lease for under one year, it may be an unwritten lease if the essential elements (except signatures) are agreed upon. However, a written lease is preferable to an unwritten lease.
Do you have a lease question? Or are you considering entering into a lease, either as a landlord or tenant? Feel free to contact us as we’re happy to discuss the lease with you.