What comes to mind when we think of a lease agreement is often that first apartment we rented after high school or college. The first lease that I signed was a lengthy document on legal-sized paper with single-spaced paragraphs in small font. It contained words such as ‘term’, ‘security deposit’, ‘possession’, ‘abandonment’, and ‘hold-over’. The amount of rent and when it was due was very clear, and the year-long term of my lease moved along quietly and without incident. The notice of termination was not clear, however, and the company and I ended up in a dispute about an extra month’s worth of rent. Eventually, the company won, and I learned a lesson in real estate law before going to law school.
We encounter leases in real estate in everyday life, and there are many types. A lease of real estate is defined in Black’s Law Dictionary as a ‘Contract wherein one lets to the other a certain space, property, or building, for specified unit of time, generally a week, month, or year’. Consideration in the form of rent is paid by the tenant to the landlord, and the parties may or may not enter into a formal written lease agreement. The leased space may be an apartment, single-family home, assisted living unit, commercial building, storage unit, or manufactured home park lot. All of these leases of different types of properties fall within the definition of a ‘lease’ and have underlying similarities. They are also subject to varying and specific Minnesota statutes as well as federal law, local ordinances, common law, contract law, other regulations.
The basic components of a lease are a description of the premises to be occupied, the length of time or term of the lease, how much rent will be charged, who will pay for utilities and other costs related to the premises, and what happens when one of the parties breaches the lease. A landlord or tenant may come to a verbal agreement on these terms, but a lease with a term over one year must be in writing under common and statutory law.
In Minnesota, leases for residential properties are governed by Minn. Stat. 504B. This statute imposes additional and very specific requirements on the landlord and tenant relationship for residential properties. For residential buildings with 12 units or more a written lease is required regardless of the length of its term. The statute requires that a tenant be provided a copy of the lease and imposes several restrictions such as a maximum late fee of 8%, restrictions on automatic term renewals, and prohibition on illegal activities by both landlord and tenant. Minn. Stat. 504B also states that a tenant has the right to call the police and seek emergency assistance and that a tenant has the right to privacy. A landlord may enter a leased unit only for a reasonable business purpose and only after making a good faith effort to notify the tenant. Lastly, Minn. Stat. 504B sets out the procedural steps and rights and obligations of landlords and tenants in an eviction action.
The lease of a lot or home in a manufactured home park is also governed by Minn. Stat. 327C and Minn. Rules Chapter 4630 which address issues ranging from park rules, disclosures, rent increases, and pets. Self – storage facilities, also known has mini-storages, have their own set of governing laws which mainly address when a lien attaches to the personal property of a renter and remedies of the owner for nonpayment of rent.
Commercial leases, on the other hand, have no specific governing statute and rely on the lease itself to set out the terms between the parties. Commercial leases have the same basic terms as residential leases but go further to address business issues such as what type of business may be operated in the leased space, which party has responsibility to pay for utilities, taxes, and insurance, allocation of other building expenses, parking, hours of operation, signage, and the like. Commercial leases are often lengthy and heavily negotiated between the parties.
What I learned in my first experience with a lease is that you must fully understand and adhere to the terms of the lease to protect yourself. Whether you’re renting your first apartment, a space for your business, or a unit in an assisted living facility, be sure to read the lease carefully before signing. It’s best for both landlords and tenants to fully understand the terms before someone moves in, and if you don’t understand a term or issue, seek assistance from your legal advisor.
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