Glossary of Lease Terms
Disclaimer: these terms are defined for guidance only and the examples are provided only to assist you in understanding the meaning of the terms. This is not legal advice. Landlord and tenant disputes are highly dependent on the exact facts of the case and no action should be taken on the basis of the definitions here provided. If you have a dispute we recommend that you seek legal advice
- Assignment of Lease An assignment occurs when an original tenant to a lease transfers the entire unexpired remainder of the lease term to a new tenant. The new tenant accepts the transfer from the original tenant of all the benefits and obligations under the lease for the remainder of the term. For example, if the original tenant signs a lease for 1 year but decides to move out of the apartment after 7 months, the new tenant will be assigned all the rights and obligations under the lease with 5 months remaining.
The assignment should be clearly evidenced in writing signed by the original tenant, the new tenant and the landlord to ensure that the original tenant is fully released from all obligations under the lease.
Most leases contain a clause regulating assignments of the lease. You should look closely at your lease to see the restrictions in your particular circumstances.
- Breach of Contract A breach of the lease contract occurs where either the landlord or the tenant fails to perform in accordance with their obligations in the lease.
- Condemnation The declaration by government that private land has been assigned to public use, subject to the payment of reasonable compensation. Most leases set out what will happen to the lease, if the leased apartment is condemned.
- Condition A condition is a category of term of a lease which is fundamental to the agreement between the tenant and the landlord. For example, conditions in a lease are commonly the terms setting out the amount and timing of the payment of rent and the implied warranty of habitability.
A breach of a condition of a lease (as opposed to an ordinary term) permits the non-breaching party to terminate the lease and/or recover damages from the breaching party.
An ordinary term, which is not fundamental to the agreement between the parties, may be made into a condition by agreement between the parties. Many leases provide that a breach of any term in the lease will entitle the landlord to terminate the lease.
See also definition of "ordinary term".
- Contract A contract is an agreement between two or more parties which creates legal obligations and rights. A contract may be oral or in writing. In order to create a valid contract:
1. the parties must be in agreement as to the terms of the contract (evidenced by the existence of an offer by one party and acceptance of the offer by the other party or parties); and
2. consideration, usually money, must have passed from the party accepting the offer to the party making the offer; and
3. the parties must each intend to create a legal relationship.
Consequently, residential leases, whether they are oral or written, are contracts provided that there is consensus as to the terms of the lease and the tenant has paid a deposit or rent to the landlord.
- Distraint (also known as distress) Distraint refers to a contractual term appearing in older form leases, which enabled the landlord to seize a tenant's property where the tenant is overdue in paying rent.
Philadelphia courts have held that such clauses are unconstitutional and consequently they are no longer unenforceable.
- Escrow Account This refers to a bank account in which funds are held until the happening of an event. If certain specified conditions are met, the funds are released to a third party. Otherwise, the funds are returnable to the depositor. For example, in certain limited circumstances, a tenant may pay rent into an escrow account, to be released to the landlord upon the completion of repairs.
- Exculpatory Clauses (also called "release of landlord clauses", also called "disclaimer of liability clauses") These are clauses in a lease contract which attempt to relieve the landlord from liability resulting from a negligent or wrongful act. The courts generally find that these clauses are ineffective, especially in circumstances of residential leases where a prospective tenant has not been in a position to negotiate the terms of the lease due to unequal bargaining power.
Although the exculpatory clause is unlikely to be effective in shielding the landlord from liability, the tenant must still be able to prove that the landlord was negligent. We recommend that you keep copies of all letters and emails sent to the landlord advising of problems with your apartment.
- Fixtures A fixture is a piece of property which is physically attached to land or a building in a way which makes it an irremovable part of the land or building. For example, an oven is a fixture in an apartment and as such forms part of the leased premises.
- Guarantor A guarantor is a person who secures an obligation of another by promising to be personally responsible for the obligation if the other person fails to perform the obligation.
For example, a tenant may be asked to provide a guarantor for a lease, such that the guarantor would be responsible for payment of the rent if the tenant fails to pay the rent. In the context of residential leasing in University areas, the guarantor is commonly a tenant's parent.
- Implied Warranty of Habitability In a residential lease, the implied warranty of habitability is a warranty from the landlord to the tenant that the leased property is fit to live in and that it will remain so during the term of the lease. At a minimum the leased premises must be safe and sanitary. The obligation does not require that a landlord provide a perfect or aesthetically pleasing premises.
This warranty is implied into every residential lease and so need not specifically be included in the written lease document to be operative.
- Joint and Several Liability If a person is "liable" they are legally responsible to pay for something. Most leases state that the persons signing the lease as the tenants are "jointly and severally liable" for the payment of the rent.
Joint and several liability means that the obligation to pay rent may be apportioned either among two or more parties or to only one or a few select members of the group, at the landlord's discretion. This means that each individual tenant is responsible for the entire obligation of the rent.
This is important to keep in mind, as if one of the tenants on the lease is unable to pay rent one month (or leaves the leased premises altogether) the remaining tenants are responsible for paying the whole of the rent.
- Mitigation of Damages Mitigation is a legal principle which requires a party to a lease, after the other party has breached the lease, to make reasonable efforts to alleviate the financial effects of that breach.
For example, if a tenant were to break the lease 7 months into a 12 month term, the landlord may not simply claim that the tenant ought pay the remaining 5 months rent in damages. The landlord is required to take reasonable steps to re-lease the premises and the claim against the breaching tenant will be limited to the damages actually incurred, ie the time between the first tenant ceasing to pay rent and the time that a new tenant commences paying rent.
Also, if the landlord has breached the lease by failing to maintain the property so that there is a leak through the roof of the premises, the tenant is required to mitigate the loss by advising the landlord of the presence of the leak within a reasonable time of noticing the leak.
- Notice and Waiver of Notice Notice refers to the legal requirement for a party to advise the other party of an intention to file legal proceedings in court to resolve a dispute. In Philadelphia, the law requires 10 days of notice for non-payment of rent and 15 days for other violations of lease terms.
Some leases may ask tenants to waive their right to notice or to reduce it to five days. The right to notice in case of non-payment of rent or other violations of the lease term is a waivable right and as such it is regulated by the terms of the lease rather than the law.
Practically speaking a landlord will be required to give notice to a tenant of legal proceedings, even where notice has been waived in the lease, due to the procedural requirements of the Philadelphia Municipal Court.
- Ordinary Term The majority of terms contained in leases are not fundamental to the agreement between the parties, and so are not conditions. Ordinary terms include the prohibition on keeping pets in the leased premises.
A breach of an ordinary term allows the non-breaching party to seek damages from the breaching party but does not permit the non-breaching party to terminate the lease.
An ordinary term may be made into a condition by agreement between the parties. Many leases provide that a breach of any term in the lease will entitle the landlord to terminate the lease.
See also definition of "condition".
- Quiet Enjoyment Quiet enjoyment is the right of a tenant to enjoy his or her property without interference. This means that the landlord must not do anything that would adversely affect the tenant's occupation of the premises. For example, the landlord must not enter the premises without the tenant's knowledge and permission, except in the case of a genuine emergency.
- Reasonable Wear and Tear Reasonable wear and tear is a vague term and may mean different things to different people. In essence, it refers to deterioration which occurs solely through ordinary use of the apartment. For example, deterioration in the carpet caused by persons walking on it. Reasonable wear and tear would not, for example, include holes in walls or stains on carpet.
Given the difficulty in proving that damage is a result of reasonable wear and tear it is important to take photographs of the apartment when you move in as well as when you move out. Such evidence will establish that, for example, the carpet was already threadbare when you moved in and the condition of the carpet is not dramatically different at the time of moving out.
- Renters' Insurance Although your landlord will likely have insurance that insurance will only cover the building of the apartment and not your personal items in the apartment. In order to protect your personal items against theft or damage you need to separately insure them with renters' insurance.
Renters' insurance can also be purchased to protect you from claims by visitors to your apartment who are injured. For example, if a visitor falls over a broom that you have left on the floor and breaks his or her leg, they may sue you for medical expenses.
Some lease contracts require the tenant to obtain renters' insurance and you should check your lease. Even if it is not a requirement, obtaining renters' insurance is a good idea.
- Security Deposit A security deposit is money which actually belongs to the tenant, but is held by the landlord in an escrow account for protection against damages or unpaid rent.
Pennsylvania law places a limit on the amount of a security deposit that a landlord may charge. During the first year of a lease the landlord may not require a security deposit of more than two months' rent. At the beginning of the second year of a lease the landlord may not keep a security deposit equal to more than one month's rent and must return any money over one month's rent which the landlord still has. After five years the landlord cannot increase a security deposit even though the monthly rent is increased. At the beginning of the third year the deposit must be placed in an interest-bearing escrow account.
The tenant is entitled to the return of the security deposit within a certain time period following the conclusion of the lease term. The landlord may deduct amounts from the deposit in compensation for unpaid rent or damage to the premises. The tenant is not liable for deterioration in the apartment which is the result of reasonable wear and tear.
- Severability Most leases contain a severability clause which states that if one clause in the lease is found to be invalid, it may be severed (or removed) from the lease and the remainder of the lease continues to be operative.
- Sublease In a sublease the tenant leases the premises to a third party, so that the tenant is both a tenant under the head lease and a landlord to the third party tenant. The tenant remains responsible for payment of the rent to the head landlord but may collect all, or part, of the rent from the third party tenant.
For tenants wishing to leave their rented premises before the ending of the lease this is an alternative to an assignment of the lease. It is also an option for tenants who are going to be away from the leased premises for an extended period, for example over the summer break. However, subleasing is different to an assignment of the lease because the tenant remains fully responsible to the landlord for the rented premises.
Most leases contain a clause regulating subleasing. You should look closely at your lease to see the restrictions in your particular circumstances.
- Subrogation Subrogation allows an insurer who pays out to an insured under an insurance policy to gain the rights belonging to the insured against a third party who caused the loss.
For example, if a tenant is injured as a result of the landlord's negligence in failing to keep the common area of the premises safe, the tenant's insurer may pay for medical expenses and then pursue the landlord for recovery of those expenses on the basis that the expenses were incurred due to the negligence of the landlord.
- Subordination Subordination is a legal term referring to the action of moving a right to a lower class than another right. Most leases include a clause making the tenant's rights inferior to all existing and future mortgages on the property and the rights of future owners of the property. This means, for example, that a new owner or the institution providing a mortgage over the property may end the lease on a foreclosure sale.
- Waiver of Custom Clauses Most leases include a clause stating that, even if the landlord does not exercise his or her rights under the lease, the landlord may still exercise the rights at a later stage.
For example, if the landlord does not complain about the fact that you pay the rent two days late for a period of three months, this does not prevent the landlord from taking action for the late payment of rent in the fourth month as the tenant is required to pay the rent by the due date.
Last modified: 2011-12-20 15:18:30