The Ultimate Residential Leasing Dictionary

May 17, 2019 Megan Eales Monroe

The larger your team grows, the more difficult it can become to keep everyone on the same page. This is especially true when it comes to getting new hires up to speed quickly and efficiently before the madness of leasing season begins each summer.

That’s why we created this residential leasing dictionary. With definitions of leasing terminology from A-Z, it’s here to help you and your team quickly grasp the concepts necessary for a successful leasing season.

If you’re new to leasing, use this list to hit the ground running, whether you’re preparing for the next leasing season, or have already found yourself in the midst of it.

If you’re a leasing expert or manager, share it with newer members of your team, or use it to get a quick understanding of any leasing terminology you may not already be familiar with. (And let us know what terms we should add in the comments section!)

Use the shortcuts below to jump to a specific term by topic, or find what you’re looking for alphabetically.

Applications and Screening Lease Provisions Lease Signing Broken Leases
Application
Background Check
Credit Check
Digital Leasing
Fair Housing Laws
Leasing Agent
Leasing Consultant
Paperless Leasing
Tenant Screening
Fixed Term Lease
Grace Period
Lease Purchase Agreement
Lease Term
Lessor
Lessee
Option to Purchase
Periodic Term Lease
Renters Insurance
Residential Land Lease
Restrictions on Use
Renewal Option
Sublease
Co-Signer
Guarantor
Inspection
Inspection Report
Lease Agreement
Online Portal
Possession
Security Deposit
Signing Incentive
Surety
Walk-Through
Assignment of Lease
Breach
Breaking a Lease
Early Termination Fee
Lease Break Fee
Re-rent Levy


Application: When a prospective renter is interested in signing a lease, they should fill out an application to provide their contact information to the leasing agent and authorize the property management company to perform a background check. This process can be streamlined with online rental applications. See tenant screening.

Assignment of Lease: If a renter can no longer fulfill their lease obligations, they may have the option to assign the lease to another qualified individual. Subject to the property manager (lessor)’s approval, they may have a new renter sign a document that assigns the original lease into their name. The new renter agrees to fulfill the lease obligations moving forward, paying rent directly to the property manager until the end of the lease term. Lease assignment is not the same thing as subletting – see sublease.

Background Check: An inquiry into a prospective renter’s work, rental, and criminal history prior to signing a lease. See tenant screening.

Breach: Occurs when either party (property manager or renter) violates the terms of the lease agreement signed. If the property manager breaches the terms of a lease, they are responsible for correcting the situation. It a renter breaches the terms of a lease, they are financially responsible for any fees stipulated in the lease agreement, or for unpaid rent. Depending on the severity of the breach, it may mean that the other party can no longer be held responsible for upholding their side of the agreement. See breaking a lease.

Breaking a Lease: There is usually a hefty fee when someone is leasing a residential property and decides to break the lease early. Typically, if a renter has signed a fixed term lease agreement, they can be held financially responsible for rent payments through the end of the lease term. However, if the property is rented to someone else before the end of the original lease, the property manager may not continue to collect rent from the renter who broke the lease. All policies should be documented in the leasing agreement and discussed prior to signing. If there are serious problems with the rental property, the renter may break the lease before moving in. These problems can include unsafe conditions, violations of city or county building codes, and issues found by the renter when they do a walk-through. See breach, early termination fee.

Co-Signer: See guarantor.

Credit Check: An inquiry into a prospective renter’s credit history prior to signing a lease. Leasing agent or property manager will receive a credit report and credit score from one or more of the major credit bureaus that indicates the prospective renter’s creditworthiness, or the likelihood that they will pay rent as agreed according to the terms of their lease. See tenant screening.

Digital Leasing: When an apartment seeker locates a property that piques their interest, they can complete an application from any mobile device, get an answer from management, and digitally sign the lease – in many cases, on the same day as the showing without leaving the property.

Early Termination Fee: When specified in the lease, a provision may require an early termination fee to be paid by renters who break their leases early. This allows the property management company to cover the lost rental income and the cost of finding another qualified renter. Early termination fees are not legal in all areas. Also called a lease break fee or rerent levy.

Fair Housing Laws: Laws protecting minority or underrepresented groups from discrimination when renting or purchasing a home. Leasing agents and property managers should be familiar with all fair housing laws and local regulations to avoid accidental violations or unnecessary liability.

Fixed Term Lease: A type of lease agreement that specifies the exact duration of time for which the lease will last. A lease may have a fixed end date, or it may last for a specific number of weeks, months, or years. Depending on local laws and the terms of the original lease, a fixed term lease may automatically become a month-to-month or at will lease at the end of the fixed term. See periodic term lease.

Grace Period: Having a “grace period” after signing the lease is the most common way a renter can break a lease without a penalty, but they cannot have moved into the property and have only a limited time to do this. Must be stipulated in the lease agreement.

Guarantor: If a renter is unable to pay rent or any other fees specified by the lease agreement, a guarantor may be held financially accountable. A property manager has the legal right to collect unpaid rent or other losses from a guarantor, also called a co-signer, if they signed the lease along with the renter. May also be referred to as the “surety.”

Inspection: After signing a residential lease, but before moving into a property, a potential renter should inspect the property. During an inspection, they should walk through the rental unit and take a careful look around for any damage, maintenance issues, or other concerns. They should turn the lights on and off, test fans and the HVAC system, make sure the electrical outlets and appliances work and examine the entire place for damage, rodents, bugs, or any other kinds of problems.

Inspection Report: Anything the potential renter notices during the inspection before move-in should be mentioned, in writing, to the property management company. Many companies have checklists or even apps that can be used for those kinds of inspections. At the end of the lease, the renter may be held responsible for any damage that is not documented on the inspection report and acknowledged by both parties.

Leasing Agent: An individual responsible for finding renters to fill rental vacancies. A leasing agent will typically schedule and conduct showings of rental units, manage communication and follow-up with prospective renters, and guide applicants through the leasing process until a lease is signed. It’s common for leasing agents to work on commission. Often used interchangeably with leasing consultant.

Lease Agreement: A residential lease agreement lays out all of the rules and requirements associated with renting the property, and when signed is a bonded agreement between the property manager and renter. All lease agreements should include the names of all adult occupants who will live in the unit, any additional fees related to the lease, penalties for breaching the terms of the lease, and the end date of the leasing period.

Lease Break Fee: See early termination fee.

Leasing Consultant: Responsible for greeting prospective renters, showing them the rental unit, and guiding them through the application and leasing process. Often used interchangeably with leasing agent.

Lease Purchase Agreement: A lease purchase agreement allows a renter to lease a property for an agreed-upon period of time, after which the renter may buy the property. If the renter buys, they typically get part of the money they have paid in rent as their down payment. If they move out, they don’t get any of that money back. This is a good way for those with poor credit, or those who do not have a down payment saved, to purchase a home. See option to purchase.

Lease Term: The specific duration of time a lease lasts for. Many residential leases are for a one-year term. They can be month-to-month, or for six months at a time. They could also be for longer than one year, but most renters don’t want to sign a lease that locks them into an apartment or home for more than one year at a time. Property management companies and owners may also want to limit the length of the lease to a renter for a one-year term at a time. See fixed end date term, periodic term.

Lessor: The party who is leasing the property to a resident (lessee). May be a property manager or an owner.

Lessee: The renter or resident who enters into a lease agreement with the property manager or owner (lessor).

Online Portal: An online, self-service hub for renters where they may find information about the property, pay rent, renew a lease, submit maintenance requests, build community with neighbors, and more. Highlighting the convenience of an online renter portal during the leasing process can attract prospective residents seeking flexibility, connectivity, and on-demand service from their new property manager.

Option to Purchase: When included in the lease agreement, this allows a renter the option to purchase a property at the end of the lease term. Typically, the renter will pay a fee in exchange for the right to purchase the property when the lease expires. The owner or property manager keeps the fee even if the renter decides not to purchase. See lease purchase agreement.

Paperless Leasing: Modern technology allows property managers and leasing agents to guide applicants through the entire leasing process digitally, all the way from filling out an application to signing a lease. Paperless leasing makes it faster and easier to fill vacancies, all while saving time and money.

Periodic Term Lease: Unlike a fixed term lease, this type of leasing agreement automatically renews each week, month, or year for as long as both parties wish to continue the lease. If either party wishes to end the lease, they must provide adequate notice according to the terms set forward in the leasing agreement. Also referred to as periodic tenancy. See fixed term lease, lease term.

Possession: When a renter moves in to their new home, they take possession of the rental unit. When they move out, they yield possession of the unit to the owner or lessor. Whether or not a renter takes possession of the unit does not change their financial obligation to pay rent according to the terms of the lease.

Renters Insurance: A type of insurance coverage that renters may purchase to provide protection against losses from damage caused to the property by fire, flood, or natural disasters, protection for personal belongings within the unit, and liability for incidents caused by renters or their guests. The owner’s insurance policy may cover damage to the property in some cases, but it is generally a good idea for property managers to require renters insurance.

Re-rent Levy: See early termination fee.

Residential Land Lease: Used to lease land to an individual that they can put a structure on. Mobile home parks often use residential land leases, as the people in these parks may own their mobile home but not the land on which that mobile home sits. The park then charges “rent” every month for the space, or the land itself, as opposed to the structure or the building in which the person lives. These lease terms may be much longer than a year, and more open-ended and without penalties.

Restrictions on Use: Activities that are prohibited on the premises of the renter’s unit, or certain actions that renters are prevented from taking under the terms of the lease agreement. For example, there may be restrictions on whether a renter may operate a business from within their residential unit, restrictions on subletting, restrictions on the number of occupants who reside in the unit, restrictions on smoking, or on any other activity the property management company wishes to prohibit or regulate.

Renewal Option: Gives the renter a right to renew the lease for another term, or multiple terms, after the initial lease end date. The renewal option might even specify the rent the renter is entitled to pay if they choose to renew the lease. Offering a renewal option is much more common in commercial real estate leasing. However, when it is offered in residential leasing, it may be very attractive for renters who wish to have the option to reside in their home long-term.

Security Deposit: A sum of money that a property management company may require a new renter to deposit prior to moving in to a new rental unit. The security deposit is intended to guarantee the renter’s lease obligations. After inspecting the property at the end of the lease term, if there is any damage that exceeds normal wear and tear, the security deposit may be used to pay for repairs. Otherwise, the lessor must return any remaining portion of the security deposit to the renter. A security deposit may also be used to recoup losses such as unpaid rent or fees. Online security deposits can help streamline the collection of these funds. Security deposit laws vary in each jurisdiction, so property managers and leasing agents should be familiar with the laws in their area.

Self-Guided Showing: To provide on-demand showings and save your leasing staff time, prospects may tour units on their own, gaining access to the unit via digital lockboxes. Before guests arrive for the showing they scheduled online, they’ll receive the lockbox code via text message so they can tour the unit at their own convenience.

Signing Incentive: To encourage prospective renters to sign a new lease and move in, some leasing agents or property managers may offer additional benefits such as reduced or free rent for a specific period of time, waived parking, pet, or storage fees,  or even a lower security deposit.

Sublease: If allowed by the property manager, a renter may rent all or some of the space within their unit to another renter for a specific duration of time. A sublease is an agreement between the primary renter and their chosen subrenter. If a subrenter fails to pay rent, the renter who signed the original lease agreement is still financially responsible.

Surety: See guarantor.

Tenant Screening: The process of inquiring into someone’s background and history before a lease is signed. The purpose of tenant screening is to identify potential “red flags” that may cause problems in the future or disqualify the applicant from your property. With screening tools that are built into modern property management software, leasing agents can instantly run credit, eviction, and criminal reports on prospective renters for a quick leasing decision.

Walk-Through: Before a renter moves into a rental unit, it’s good practice for management to schedule a time to inspect the unit together with the renter and document any pre-existing damage or maintenance concerns so that both parties are in agreement about the condition of the property before the renter takes possession. This ensures that a renter will not be held responsible for damage that they did not cause. See inspection, inspection report.

We hope that this residential leasing dictionary has shed some light on a confusing aspect of the leasing process, added a new term to your leasing vocabulary, or helped you get up and running in a new role quickly.

Sources

Take a look at the sources we consulted to create this dictionary below for further reading:

Typical Provisions in Leases and Rental Agreements, Nolo.com

Residential Lease Agreement FAQ – United States, LawDepot

How Do Ownership and Possession Relate? Laws.com

Apartment Leasing Consultant Job Description (Sample), Multifamily Insiders

 

Is there a term we missed? Let us know in the comments.

 

The post The Ultimate Residential Leasing Dictionary appeared first on The Official AppFolio Blog.

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