Rental Agreement

Definition of "Rental Agreement"

Written by

J R Smith

RE/MAX Palm Realty Of Venice

A rental agreement is a written contract that establishes a temporary arrangement between the owner of a property and an individual who wishes to have possession of the property for a period of time. It is different from a lease, which commonly spans a fixed duration. The core components of this agreement are the following: 

• The identification of the involved parties
• A description of the property in question
• The duration of the rental period
• and the agreed-upon rental fee for the specified timeframe.

In this context, the property owner is commonly referred to as the lessor, while the individual renting the property assumes the role of the lessee. 

Within the framework of the contract, a rental agreement can be either implicitly understood, explicitly stated, or formally documented, where the terms of the rental are specified. The terms and conditions governing the rental agreement fall under the purview of contract law and are legally binding. Some examples are renting real estate for residential purposes (the tenant rents the living space), allotting parking spaces, storage areas, and commercial or agricultural use. Other reasons can be institutional, governmental, or other.  

The contract plays a vital role in establishing clear expectations and harmonizing the obligations of both the lessor and lessee during the course of the rental agreement.

Rental of real estate

Within the context of real estate, a tenancy agreement - often synonymous with a rental agreement - lays out the specifics of the agreement. Apart from the key elements of a rental agreement, it can address aspects such as security deposits, utilities, maintenance responsibilities, and any specific rules or regulations that govern the use of the property. These arrangements can be tailored to suit different types of real estate rentals, including residential, commercial, agricultural, or industrial. 

Rental insurance

In the context of real estate rental, insurance refers to the financial protection and coverage that landlords obtain to mitigate risks associated with renting out their properties. Insurance helps safeguard against potential damages, liabilities, and unforeseen events that could impact the property or the landlord’s financial interests. In the United States, homeowner insurance policies related to rental properties vary based on the type of property and the intention of use. 

In the United States, there’s a type of homeowners insurance especially for renters. This insurance is called the HO-4 type, and it is also commonly referred to as renter’s insurance. The renter’s insurance is similar to the condominium insurance (HO-6 policy), covering some aspects referring to the apartment and its contents, which are not included in the blanket policy which holds for the complex.  

Renter’s insurance offers “named peril” coverage, which means that the insurance says specifically what you are insured against. The most common areas covered are fire and lightning, windstorms, smoke, vandalism or malicious mischief, theft, and accidental discharge of water. In some circumstances, riots, aircraft, hail, explosions, falling objects, snow, sleet, or volcanic eruptions can also be included on the list of covered unfortunate events. 

Security deposit

In most cases, a security deposit is included in the rental agreement between the lessor and the lessee. This deposit serves the purpose of covering unforeseen damage to the property. The deposit is owned by the tenant and held by the landlord. When the property is surrendered in good condition, the deposit is restituted to the tenant. In some states, the landlord must provide a list of the pre-existing damages to the property in order to determine if the tenant is responsible for the damage. In some states, the owner of the property has an obligation to hold the deposit in a bank account (with the account number provided for the tenant) and pay the interest to the tenant.