Form-of-the-week: Residential Lease Agreement – Form 550

Periodic and fixed-term tenancies distinguished

Residential landlords and tenants either enter into a:

  • periodic rental agreement; or
  • fixed-term lease agreement.

Residential periodic tenancies take the form of month-to-month rental agreements. [See first tuesday Form 551]

When leasing a residential property on a fixed rental-rate basis for a specific period of time, a lease agreement is used. [See first tuesday Form 550]

Both residential rental and lease agreements grant and impose on the landlords and tenants the same basic rights and obligations. Their differences lie in the expectation of continued occupancy and the obligation to pay future rent.

A month-to-month rental agreement runs for an indefinite period of time. The tenant’s right to occupy the property on the same terms automatically renews monthly, until modified by the landlord or terminated by either the tenant or the landlord. [See first tuesday Form 551 §3]

Periodic tenancies may be terminated by either the landlord or tenant on 30 days’ written notice. As an exception, when a residential tenant’s occupancy of a unit exceeds one year, the landlord needs to serve the tenant with at least 60 days’ written notice. [Calif. Civil Code §1946; see first tuesday Form 569 and 569-1]

On the other hand, a lease agreement creates a tenancy that continues for a fixed period of time. At the end of a fixed-period tenancy, the tenant’s right of possession expires as agreed. The termination of the tenancy is set by the expiration date in the lease agreement. No further notice is required by either the landlord or tenant to terminate the tenancy. [See first tuesday Form 550 §3]

Unlike a periodic tenancy, the lease agreement does not automatically renew, unless:

first tuesday’s Residential Lease Agreement is a fixed-term lease agreement used by a leasing agent, property manager or landlord when leasing a residential property on a fixed rental-rate basis for a specific period of time, to grant the tenancy and set the terms for rent and conditions for maintenance.

The Residential Lease Agreement:

  • sets the amount of rents to be paid;
  • identifies who will provide and pay for utilities; and
  • allocates the maintenance responsibilities and their costs between the landlord and tenant. [See first tuesday Form 550]
Conditions imposed on a residential occupancy
Residential tenants typically provide a security deposit to the landlord to cover any cost to clean the unit or remedy any damage caused to the unit beyond reasonable wear and tear. [See first tuesday Form 550 §2]

In return for the use and possession of the premises, the tenant pays the landlord rent until expiration of the lease. The tenant agrees to pay a late charge if rent is not paid on the due date, or within the established grace period. [See first tuesday Form 550 §4]

Also, a list of occupants who will reside in the property in addition to the named tenants is provided in the lease. Occupants are treated differently than guests. The number of guests the tenant may have in their unit, and the period of time over which their guests may visit, is limited. [See first tuesday Form 550 §§5.4 and 5.6]

The tenant agrees to comply with all building or project rules and regulations established by any existing covenants, conditions and restrictions (CC&Rs) or the landlord. [See first tuesday Form 550 §6.1]

The landlord and tenant agree who will pay or how they will share the financial responsibility for the unit’s utilities. Landlords of apartment buildings or complexes often retain the responsibility of providing water to the units. [See first tuesday Form 550 §6.2]

The tenant also agrees to hold the landlord harmless from all liability for damages caused by the tenant or their guests. For this purpose, the tenant is often required to provide insurance coverage. [See first tuesday Form 550 §7.1]

Existing statutory rights and duties restated
Residential rental and lease agreements often contain provisions that restate the landlord’s and tenant’s statutory rights and duties which are not well understood. first tuesday’s Residential Lease Agreement reiterates the landlord’s statutory obligation to furnish a tenant with:

  • a security deposit refund;
  • a notice of the tenant’s right to a joint pre-expiration inspection of the unit and delivery of an itemized statement of repairs and needed cleaning [CC §1950.5(f)]; and
  • a statement of security deposit accounting and an itemization of any deductions. [CC §1950.5(g)(1); see first tuesday Form 550 §2.4]

Further, the lease agreement advises tenants of their limited statutory right to make necessary repairs to the premises and deduct the cost from the rent when the landlord fails to make the repairs the tenant has brought to the landlord’s attention. [CC §1942; see first tuesday Form 550 §5.8]

The lease agreement prohibits a tenant from:

Even if a lease agreement does not restate these statutory prohibitions, a tenant who conducts any of these prohibited activities may be evicted by the landlord with the service of a three-day written notice to quit. Here, no alternative performance is available to the tenant. [Calif. Code of Civil Procedures §1161(4); see first tuesday Form 575 and 575-1]

In the event the premises is totally or partially destroyed and becomes uninhabitable, either the landlord or tenant may terminate the lease by giving written notice. When the lease is not terminated, the landlord needs to repair the premises and prorate the rent for the period of time the premises is uninhabitable by the tenant. [See first tuesday Form 550 §8]

Lease negotiations on expiration
A landlord may not alter the terms of a lease agreement during the life of the lease without consideration and the tenant’s consent.

To extend a soon-to-expire lease agreement, the landlord may contact the tenant and offer to enter into:

  • another lease agreement; or
  • a month-to-month rental agreement.

Often, a residential tenant wants to remain in possession on expiration of their lease. The amount of rent a landlord may demand and receive to extend a lease is limited only by negotiations and economic forces existing in the local rental market.

An exception to negotiations over the amount of rent to be charged exists in rent control communities, unless market rents have dropped below the maximum set by local ordinance. [See first tuesday Form 550 §1.3]

As an alternative, a proactive and forward-looking landlord openly negotiates and grants options to renew or extend when initially entering into a lease agreement. The right to extend the occupancy may be all that is needed to induce the tenant to remain a tenant on expiration of the lease. [See first tuesday Form 565]