Lease agreement

Key Takeaways

• A lease agreement transfers possession of property from an owner to a tenant for a stated term in exchange for rent.
• A lease is both a contract and a conveyance: it binds the parties to promises and it carves a leasehold estate out of the owner's ownership.
• In Washington, a tenancy from year to year exists only when it is created by an express written contract (RCW 59.04.010).
• In a Washington residential lease, a clause that waives a right or remedy under chapter 59.18 RCW is against public policy and unenforceable (RCW 59.18.230).

What It Means

A lease agreement is the contract in which a property owner lets another party occupy and use property for a set period in exchange for rent. The owner is the Lessor, the occupant is the Lessee, and what changes hands is possession rather than title. That makes a lease two instruments at once: a contract that binds both sides to promises, and a conveyance that carves a Leasehold Estate out of the owner's ownership for the length of the term.

Every lease has to settle the same core points. Who the parties are, what space is being leased, how long the term runs, how much rent is due and when, and what each side must do about repairs, utilities, and insurance. Past that shared core, leases diverge sharply by type. A one-year apartment lease and a triple net lease on a retail building can look nothing alike, because the rent structure and the split of operating expenses are negotiated differently. The written document controls the deal the parties made, but for residential property the statute sets a floor under those terms that the document cannot lower.

How It Works in Washington

In Washington, which body of law governs a lease agreement depends on what is being leased. A lease of a dwelling unit falls under the Residential Landlord Tenant Act, chapter 59.18 RCW, which supplies terms whether the parties wrote them or not: the landlord's duty to keep the premises fit for human habitation (RCW 59.18.060), the tenant's duty to pay rent and keep the occupied space clean and sanitary (RCW 59.18.130), and deposit rules that require a written agreement and a signed move-in checklist before any deposit is collected (RCW 59.18.260). A residential clause that tries to waive any of that is unenforceable (RCW 59.18.230).

Form matters too. RCW 59.04.010 abolished tenancies from year to year except when they are created by express written contract, so a year-to-year arrangement in Washington has to be written to exist as one. Commercial and other nonresidential leases sit outside chapter 59.18 RCW. There the written terms and common law carry the deal, and chapter 59.12 RCW supplies the unlawful detainer procedure if the tenant holds over or stops paying. The notice periods differ accordingly: RCW 59.12.030 gives 3 days on a pay-or-vacate notice, but 14 days for a tenancy under chapter 59.18 RCW. Reading the wrong chapter onto the wrong property type is the most common way this goes wrong in practice.

Example

Northgate Retail Partners leases a 1,200 square foot storefront in Everett to Hana's Bakery for a five-year term beginning June 1. The lease agreement sets base rent at $22 per square foot per year, so annual base rent is $26,400 and the monthly base payment is $2,200. It is a triple net lease, so Hana also pays her share of property taxes, building insurance, and common area maintenance, estimated at $6 per square foot per year, which adds $600 per month for a total of $2,800.

The agreement requires a $6,600 security deposit equal to three months of base rent, makes rent due on the first with a five-day grace period, and permits subletting only with the landlord's written consent. Because the premises are commercial rather than a dwelling unit, chapter 59.18 RCW does not apply to this lease. The deposit rules, the repair obligations, and the notice periods are whatever the parties wrote, backed by common law and by the unlawful detainer procedure in chapter 59.12 RCW.

Common Mistakes and Exam Traps

• A lease is both a contract and a conveyance. Answers calling it only a contract, or calling it a transfer of title, are wrong for opposite reasons.
• A lease grants exclusive possession for a term. A permission to use space without exclusive possession, such as a booth or a locker, is a license rather than a lease agreement.
• In Washington a residential lease clause is not enforceable merely because both parties signed it, since chapter 59.18 RCW rights cannot be waived by agreement.
• Chapter 59.18 RCW covers dwelling units, so residential notice periods and deposit rules do not carry over to a commercial lease question.