An Overview of Lease Agreements
Lease agreements are contracts entered into between a landlord or lessor and a tenant or lessee. Their purpose is to comply with the Statute of Frauds which requires certain contracts be in writing and signed. A lease or rental agreement defines important things including how much rent is to be paid, when it is due, security deposits required of the tenant, what obligations are imposed upon the property owner, a list of banned substances on the property, whether the entire property is being rented or only a portion of it, a list of appliances being provided, what amenities are included or excluded and other items important to the property owner and their tenant . Lease agreements are generally written for either a specific term or an indefinite period of time. Term leases are monthly, yearly or multi-year based contracts. Indefinite leases do not have a specific duration. They often automatically renew at the end of a term until cancelled by either party. The length of the lease and other aspects should be fully understood before it is signed by both parties. It may be amended by mutual agreement between the parties. Unless amended or cancelled per terms specified in the contract, the terms of a lease agreement survive the sale of a property.
Key Elements of a New Mexico Lease Agreement
The cornerstone of any lease is the agreement itself – a formal and biding contract between landlord and tenant. The lease should outline any and all details about the rental, including the terms of the contract, tenant and landlord obligations, and recourse for any damages or disagreements.
The most common details found in any New Mexico lease agreement include: Tenants: A basic lease will enumerate who is allowed to reside on the property, a provision requiring tenants to notify the landlord anytime a guest is to stay with them for longer than two weeks, and that tenants are responsible for cleaning all carpets and any appliances.
Landlords: The provisions for landlord obligations can be extensive depending on the size of the rental unit. Most lease agreements will state that it is the landlord’s responsibility to provide a clean and sufficiently habitable environment, check for hazards, make necessary repairs, abide by any community policies, keep common areas properly maintained, and inspect and remove any snow or ice from any external walkways.
Rent Terms: Any New Mexico lease will detail how much rent is due, when it is due, with whom the rent should be made payable, and where it should be delivered. Non-payment terms should also be listed along with how the rent can be raised and how much notice is to be given by both the tenant and the landlord.
Security Deposits: Any rent lease will likely include information on the amount of the security deposit, what the security deposit can be used for, and how the money will be handled after the lease has ended.
While the above list is not exhaustive, it does cover the most important elements in a New Mexico lease agreement. Each lease will vary slightly, so it is important to have real estate attorney review your lease to ensure that you and your lease holder are covered.
Legal Mandates and Regulations
Fast, flexible, friendly, and often savvy, your local real estate agent is your go-to friend for helping you find that perfect home. But what happens when, after years of working with you to find a home that’s just right, you discover that you don’t have the credit score to buy, or really don’t want to stay in one place that long? Your local realtor will hook you up with a great rental agreement (with options for rent to own) and even negotiate highly competitive prices to get you inside your new pad. However, did you know that your local real estate professional is not a lawyer? Their advice has inherent risk, so double check and make sure that you know the legal requirements for lease agreements before signing anything.
In New Mexico, rental lease agreements in general do not have to be registered with the county clerk or recorded so long as the rental agreement does not explicitly mention any duties of the tenant which must be performed on the premises itself. Unlike a lease agreement, which concerns an interest in land, a rental agreement concerns the possession of land. While some states require the tenant to register a rental agreement, New Mexico does not.
While a formal written contract is not necessary for rental agreements and some lease agreements, it is suggested. For residential property, single family or duplex, a rental agreement must either be written in plain English or adequately advise the tenant to have an attorney draft one for them. When you rent or lease any other kind of property, you do not have the same rights, but it is certainly a good idea to hire a New Mexico real estate attorney who can draft a solid lease agreement that would stand up in court.
The New Mexico Uniform Owner-Resident Relations Act covers the legal requirements for both landlords and tenants. According to the Act, a rental agreement for a period of one year or less can easily be terminated by either party with a minimum of thirty days’ notice prior to the end of the term. For annual or longer-term rental agreements, both the landlord and the tenant will be required to give a minimum of thirty days’ notice prior to a rent payment (for example, January 5th) to the other party of intent to terminate the rental agreement.
The New Mexico Uniform Owner-Resident Relations Act also covers security deposits but not the amount that a landlord can ask for. For all rental agreements or lease agreements, New Mexico law prohibits a landlord from requiring a security deposit larger than the amount of one month’s rent. If the rental agreement or lease agreement is for a period of 15 days or less, the State of New Mexico allows the landlord to require the tenant to pay the first month’s rent in addition to the last month’s rent for security. While laws vary from state to state, generally speaking, a landlord cannot charge additional fees for pets, criminal background checks, or extra residents unless agreed upon in advance in the rental agreement or lease agreement. If you have any further questions, consult with a great New Mexico real estate attorney!
Common Mistakes to Watch Out For
Common mistakes that landlords and tenants should avoid when reviewing or signing a lease agreement are: Make sure you know who is signing. If a property is owned by an entity don’t have the manager of the LLC sign or someone without authority sign. If a partner wants to sign for a partnership and they don’t have authority then penalties could be incurred. Do not sign if changes are hand written on the document. New Mexico Commercial Lease Agreements provide a space for additional terms or changes. However, if the changes are handwritten then that area should be initialed by all parties to avoid a situation where the landlord or tenant could avoid the terms of the contract by simply claiming that it was not part of the original agreement. Do not sign if there are blanks in the lease. Just as unique items should be filled in properly with correct information, do not overlook anything else that needs to be done to the agreement before it is signed and returned. Do not leave any blanks. Do not skip the lease addendum. The Lease Addendum provides all issues with a lease that need to be discussed and agreed upon in writing. It also contains information that is not typically provided in the Lease Agreement. Protect your rights and avoid common pitfalls by consulting an experienced attorney.
Amending a Lease Agreement
While a written lease agreement is legally binding and enforceable, it is not set in stone. It can be modified by the parties at any time during its duration if there is a mutual agreement to the modification. In some cases, modifications may be required if the original lease was not drafted properly or if circumstances have changed beyond the control of the parties. In fact, in New Mexico, real estate (including oil and gas leases) is treated as personal property or intangible property and the doctrine of merger does not apply to an acquisition of real property by lease. Because a lease is considered a personal property interest, the law permits separate agreements that may and do modify the lease even when the lease contains covenants to the contrary.
Under New Mexico law, leases are subject to the doctrine of equitable severability, which permits this separation between lease and other concurrent agreements . Carnival Stock Co. v. Shubert, 244 U.S. 486 (1917). Another way of stating this is to say that a lease is not a single operative document but instead consists of multiple documents that make up the full and complete agreement of the parties. In accord with this view, the New Mexico Supreme Court has held that "A lease (of real property) usually consists of a number of inter-dependent and interrelated documents, including a lease and the so-called leasehold mortgage, and the rights of the parties depend upon the entire series as a whole and not upon any one single document in the series." Allmand Bros. v. Brooks, 28 P.2d 645 (N.M. 1934).
It is important to note that such an agreement does not constitute an amendment to the lease in the technical sense of a change in the terms of the contract but rather a side agreement that lays out the agreement between the parties with respect to a certain provision of the lease.
Terminating a Lease Agreement: Guidelines and Implications
Breaking a lease is rarely convenient or inexpensive. Unfortunately, it is sometimes necessary. The better you understand the law before the need arises, the more satisfactorily you can deal with the situation. Though New Mexico law does not provide any strict guidelines for breaking a lease, it does address essential terms in a rental agreement that are relevant when breaking a lease. For instance, New Mexico state law requires that:
These terms affect how the lease can be terminated, what the penalties are should a party break the lease, and how much notice a party must give before breaking the lease. If there is no mention of breaking a lease in the rental agreement, there is nothing that prohibits either party from terminating the agreement. However, some leases will specify that tenants must give either 30 or 60 days notice, or some other amount of time, and that landlord may charge a penalty.
What is more, the lease may set forth a specific procedure that either party must follow to cancel the agreement. For example, a lease may say that if the tenant wants to vacate the premises, he or she must give written notice to the landlord of their intent to leave at least 60 days in advance of the lease end date. In this case, the tenant would not be in breach of the rental agreement by providing proper notice.
When you provide a notice to vacate, be sure to maintain a copy for your records, so that you have a record of how much advance notice of your intent to leave you provided. If you are a landlord and plan to take legal action to recover lost rental income or other damages from a tenant who broke the rental agreement, it is important that you have documentation of the notice to vacate. The good news is that a tenant will not be able to refute the fact that he or she terminated the lease if you send a termination notice via certified mail.
The Tenant Protection Act provides that only two situations exist, other than those addressed in the rental agreement, that may allow a person to break a lease without having to pay penalties. First, the provision of a residential rental unit is a material violation that affects the safety or health of the tenant. Second, a victim of domestic violence has the right to terminate a lease. When this happens, the tenant is still responsible for all rent due before the date of termination and the landlord has a right to withhold a proportionate share of any security deposit, based on the number of days remaining in the term of the lease. A landlord cannot include a clause in a residential lease that waives the right of a domestic violence victim to terminate the lease, nor can a landlord charge a tenant a fee for early termination of a lease due to such circumstances.
If you are a tenant that is being forced to break a lease because of an unsafe or unhealthy condition in the unit, it is recommended that you put the landlord on notice of the problem in writing. This will give them the opportunity to fix the problem while giving you documentation to support your case in the event that the landlord later tries to hold you to the rental agreement.
Best Practices for Crafting a Concise Lease Agreement
1. Read the agreement carefully
Both landlords and tenants are well-advised to read the entire lease, including the fine print, before signing. If you have not been sufficiently advised of the terms by your landlord prior to signing, ask to have any and all terms explained.
2. Have an attorney review the drafted agreement before signing
If you are a landlord or an experienced real estate investor, you may be tempted to engage in "do it yourself" drafting of your lease agreement. If you do not have much experience, however, always have an attorney review your lease agreement before signing – especially if you are being advised by a real estate agent or broker who is not an attorney. A poorly drafted lease may result in litigation. For a tenant, a poorly drafted lease may result in a misunderstanding about your rights and obligations. It is always advisable to have an attorney in New Mexico assist you in drafting a residential lease agreement. For landlords, a residential lease agreement that does not abide by New Mexico’s Residential Rental Property Act and is not drafted by an experienced attorney may be deemed void. And both landlords and tenants often fail to realize that the law may presume different terms than those set forth in the written lease agreement.
3. Make sure that all parties understand all terms and are clear as to their meaning
Make sure that all parties understand all the terms of the agreement, and are clear as to their meaning. If a term is unclear, address any questions about it prior to signing the agreement. However, also be aware that you should not expect every possible question to be answered prior to signing. A good example is the question of which party is responsible for snow removal. The standard in New Mexico is that the landlord is responsible for the first 4 inches of snow, but the tenant is responsible for the remainder. A landlord can agree that their property manager will partake in this duty, but the property management company is not held liable for this duty.
4. Consider potentially sensitive subjects before broaching them
There is often a power imbalance in the U.S. between landlords and tenants. A landlord may be unwilling to even negotiate terms in a lease agreement. For such sensitive and potentially contentious issues as pet policies, rent increase caps and other recognition of the personal needs of the tenant, it may be best for the tenant to propose a change.
5. Anticipate future needs that might be accommodated in the contract, as well as concerns that could lead to the dissolution of the contract
Consider possible future leases that could be accommodated in the contract (for example, one that allows for a pet) as well as possible concerns that could lead to the dissolution of the contract (such as a proposed early termination fee).
6. Consider the effect of special statutes on the required terms of a residential agreement
Consider the effect of special statutes – such as the Residential Rental Property Act or the New Mexico Manufactured Home Lot Rental Act – on the required terms of a residential agreement. Failure to consider the effects of these statutes can lead to disappointment with the outcome of a dispute.
Where to Find Additional Help with Lease Agreements
Resources for Lease Agreement Assistance in New Mexico
Either a landlord or a tenant should consider consulting a lawyer when entering into a lease. In particular, a landlord that is leasing a commercial property in New Mexico should consult an attorney to ensure that the lease complies with New Mexico law and meets the landlord’s intent in entering the lease (e.g. maximizing the landlord’s ability to evict a non-paying tenant or another tenant that causes a disturbance or physical damage to the property). For a tenant, hiring a lawyer may give a tenant a greater understanding of the legal processes and requirements of a lease before executing a lease and begin living in the property.
Many tenants (particularly residential tenants) will not be hiring an attorney to draft a lease, and landlords may also be wary of cost. This is particularly true for commercial leases, which often reach into the hundreds, if not thousands, of dollars for attorney fees. Luckily, even without hiring a lawyer, there are many resources available to tenants and landlords.
The University of New Mexico School of Law offers an excellent website that includes links to business and landlord/tenant resources in Albuquerque and throughout New Mexico. Many of the resources listed are links to service providers that offer services directly to the public and a number of these service providers can assist a person with a lease . The State Bar of New Mexico and the New Mexico Legal Aid Society also have excellent resources on their websites related to landlord/tenant issues. Some of these resources include links to free online lease forms.
A variety of professional legal services providers – many of whom are free – are available for individuals with legal needs tagged to a particular income level. In some cases, to qualify for these services, you must meet the eligibility requirements set by program and must open your case with that program. The New Mexico Lawyer Referral for the Public provides detailed information on the services and helpers available to New Mexicans.
Additional, more business-focused entities also provide good information and resources on the formation of leases. For example, the New Mexico Small Business Development Center provides a list of links to resources inside and outside of the state of New Mexico that address commercial lease formation. New Mexico Small Business Development Center also offers a number of resources for commercial leases including an article summarizing rules businesses should follow to negotiate commercial leases and link to sources for further assistance and other information including a sample of a basic ten-point commercial lease checklist.