Understanding The Different Types Of Apartment Lease

“Understanding The Different Types Of Apartment Lease” written by Mike Marko

Do you know what type of lease is best for you and your tenants?

Not all tenants are the same. Some of them are looking for a place to stay for a long time while some of them are just looking for a temporary place to stay. The right type of lease may even help you to fill in the vacancies in your apartment.

Having the knowledge of what type of lease to offer to each of your tenants is advantageous. In this article, I will go over the different types of an apartment lease so you can make an informed decision.

What You Should Know About An Apartment Lease

A successful residential property management business normally manages home and apartment style rentals. When building your rental business you will find that a home lease is much different than an apartment lease in needs, details, and responsibilities. Choosing the perfect type of apartment lease that meets all the needs, details and responsibilities for the rental for booth yourself and for your tenant would be beneficial to your business.

However, knowing what an apartment lease is and identifying specific terms that separate it from a home lease is where we should start…

What Is An Apartment Lease

An apartment lease is a contract between the tenant and the property manager and is a legally binding contract that spells out responsibilities and terms for both the tenant and property manager for the rental of an apartment. An apartment lease is specific to living in an apartment and details the needs and responsibilities as well as detailing the conditions or terms of renting the property.

Once the apartment lease is signed, this legal document or contract will give the tenant the right to occupy or stay in the apartment for a specified period of time.

So now that we understand what an apartment lease does let’s look at the specific different types of apartment leases available…

Types Of An Apartment Lease

When accepting new tenants, it’s important to consider what type of tenancy is best for their needs as well as what you’ve determined is best for your property management business requirements. Choosing the right type of lease for you and your tenant would be beneficial to helping your business run efficiently and effectively during the rental of the property.

Here are the different types of an apartment lease that you can offer to your tenants.

Long-term Lease

A long-term lease is also known as a fixed-term lease. This is the most common type of apartment lease and it allows a tenant to rent an apartment for a given period of time, usually minimum of one year. This type of lease is preferred by tenants who would like to negotiate rents to stay fixed for a specific period of time.

Often when signing a long-term fixed-term lease the tenant will receive a discount on rents as the property manager will not have to worry to fill the rental for the term of the lease saving costs. Once the contract expires, the tenant can either leave the property or continue the tenancy through a month to month lease. At the end of the lease term, the fixed-term lease can have a clause added that states that it becomes a month to month lease agreement until renegotiated and signed for a new fixed-term.

Month-to-Month Lease

A month to month lease is a type of apartment lease that gives both the tenant and the property manager the right to terminate the lease at any desired time by sending proper legal notice of termination of the lease. However, the termination must be done properly and a notice should be given to the other party.

This type of apartment lease is effective for 30 days then you can add terms that state that the lease becomes a self-renewing month to month type of lease. Each month at the end of the lease period both parties can ask to renegotiate terms, rents, and other responsibilities of the lease. With a shorter term lease, it is much easier to charge the market value or a premium rent because it is a short-term lease. So, in essence, a tenant could renew the contract every month but the rate of their rent would be higher compared to tenants with a long-term contract.

If either of the party wishes to end the tenancy, a proper notice should be given at least 30 days in advance.

Proprietary Lease

A proprietary lease is the type of lease which is normally used in apartment and condominium co-op scenarios. A proprietary lease allows the tenant to purchase shares of stock and becomes part owner of the co-op in exchange for the right to occupy the desired apartment or condominium. This type of lease is only good to use if the owners of the building or apartment/condo wish to sell the unit through a rent to buy agreement. If that is not desired then you should use a fixed term or month to month style lease on these types of properties…

The co-op board acts as the landlord while the shareholder as the tenant. These types of leases are generally easier to manage as the tenant is becoming the owner so many of the responsibilities to fix and upkeep become theirs to fulfill.

Sublease Agreement

Before adding a sublease agreement to the terms of your contract you and your tenant need to know and understand the conditions that will allow and become effective if a sublease agreement is enacted.

A sublease agreement is a term to any lease contract that allows the original leaseholder or tenant to rent their apartment to someone who is not part of the original lease. The contract made between the third party and the tenant is called sublease agreement. This scenario usually occurs when a tenant wants to leave the apartment early but wants to avoid breaking the lease.

When offering and setting up a sublease agreement clause you can dictate the conditions of what the new subleased tenant must meet as in requirements to rent. Property managers usually require the original tenant to obtain a consent to sublease before the new tenant can occupy the property.

In most cases, a tenant cannot sublease the property without the written permission of the landlord or property manager. It’s also very common to require the subleased tenant to go through the same tenant screening and background checks prior to allowing them to sublet the rental and take over the original contract until it expires.

What Does An Apartment Lease Cover

Not all apartment lease agreements are the same. Apartment leases contents may differ and it all depends on the type of tenancy that the tenant has as well as the type and style of the rental property.

However, each of the different types of lease agreement shares some common information.

Here are the things that an apartment lease cover…


Since we are in property management business to make money for our investors and our business defining and collecting rent is key to making a profit. All kinds of lease agreement contain important information about the rent. Including terms to the contract that detail the amount of rent to be paid to the property manager is usually included along with the penalties for late payment of rental fees. Most property managers also add details about their preferred and accepted mode of payments.

Length Of Tenancy

Knowing and understanding your rental properties and what and how you want to manage them is key to determining if you want short-term tenancy or long term tenancy for your rentals. The details about the length of the tenancy is also a common clause detailed and included in a lease agreement.

In addition to determining the type of tenancy either fixed-term or month to month, the length of the tenant’s stay in the property is usually listed in this part of the contract terms along with the start and end date of their tenancy.

Security Deposit

A security deposit is important to collect from all tenants renting to offset any damages that may have occurred to the rental property due to that tenant’s fault or due to a condition or term listed in the contract or lease. Most apartment lease agreement includes details about the tenant’s security deposit like how much is required and uses when the tenant leaves the rental.

The usage of the security deposit is what can normally cause troubles and misunderstandings between property managers and tenants. That’s the reason why this is one of the important clauses that should be included in a lease agreement and the details of its use should be understood by all parties to the contract proper to the signing of the rental contract.

Usually, lease agreement states the amount of security deposit needed to be paid by the tenant. Aside from that, the instances where a property manager is allowed to use the security deposit is also written.

Here are the most common reasons why a security deposit is used:

  • The tenant fails to pay the rent
  • The tenant caused damages to the apartment
  • There are terms that detail replacement or cleaning of carpets
  • Charge for any items left or abandoned when vacating the rental

Utility Fees

Since an apartment building is sharing utilities and other services it is important to detail the responsibilities of the tenant prior to renting in an apartment style lease. The details about the utilities are also written in every lease agreement. Not all rental property business shares the same rules as many require their tenant to pay the utilities such as water, gas, electricity, garbage collection etc..

When renting a unit or apartment in an apartment building you as the property manager need to determine if gas, electricity, garbage collection etc are separate or a community charge and set up the contract or lease accordingly…

It is advisable to state in your lease agreement if the utilities are already included in the rental dues or will be paid separately.

Subletting Clause

Most apartment lease includes details about subleasing or subletting of the apartment unit. If subletting is allowed, inform your tenant that a written permission from the property manager and any other conditions required for the new tenants is detailed and is required before they could do a subleasing or subletting of the rental unit.

No Pet Policy

Prior to renting your properties, you should determine if you will allow or not allow pets to be part of the rental units. Pets can be a big issue and often times the determining factor for rental of your rental properties. If pets are allowed, include it in your agreement and write additional rules in taking care of the pets inside the rental unit as well as the size and any noise requirements that must be met since they are in a community apartment style unit.

You may also want to specify if there is any payment for having pets in your apartment and collect an additional deposit for any damage the pet may due to the property...

Final Thoughts On The Different Types Of An Apartment Lease

Choosing the right type of apartment lease for your tenant can help your business. If a tenant wants to stay for a long time, give them a long-term lease if that fits your business goals. But if your tenant is just looking for a temporary place to stay, you may consider offering a month to month lease where rates can be higher compared to other types of lease. The proprietary lease is the right choice for co-op scenarios while the subleasing is for the tenants who are allowing other individuals to rent their rented property.

Please feel free to post questions or additional ideas related to the apartment lease in the comment section below.




Suggested Articles:
1. 8 Top Landlord Leasing Tips To Remember
2. 6 Tips For Choosing The Best Background Check Service
3. Key Points To Know About A Rental Agreement

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Article: Understanding The Different Types Of Apartment Lease

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