A Brief Introduction of Prorated Rent Lease Agreement
A prorated rent lease agreement is a lease agreement between a landlord and a tenant that contains a prorated rent clause.
What is the prorated rent? The meaning of prorated rent is the partial rent that a tenant pays if he has not stayed at the leased property for the entire month. This may happen if the tenant moves into the property in the middle of the month or if he moves out before the month is over. In such a scenario, the tenant will only have to pay for the number of days he is actually occupying the property and not for the entire month. Prorating rent while moving out before the month is over is beneficial for the tenant.
Who Takes the Prorated Rent Lease Agreement?
A prorated rent lease agreement, like any other lease agreement, is entered between the person who owns the property (known as the “landlord”) and the person who wishes to rent it out from him (known as the “tenant”).
Purpose of the Prorated Rent Lease Agreement
The purpose of a prorated rent lease is to lay down that prorated rent will be applicable in case the tenant does not stay for the entire month at the leased premises. The agreement is useful in laying down the manner in which the rent will be calculated for the proration period. Having such a provision in a lease agreement ensures that the interests of the tenant are protected.
When such a stipulation is made part of the agreement, it also ensures that there is no dispute between the parties regarding the payment of rent at any time in the future. Whether there are any prorated rent laws that apply would vary from state to state.
Contents of the Prorated Rent Lease Agreement
A prorated rent lease will contain the usual clauses that are present in every lease agreement. This will include the identity of the landlord and the tenant. It must also include the date on which the agreement is created and the date on which the lease period shall come into existence.
The agreement must lay down the amount of rent that will be payable by the tenant and the date by which such payment is to be made every month. The amount of security deposit payable should be clearly mentioned. The important clause in this agreement is the prorated rent clause. This clause will contain the manner of calculating prorated rent. It may be calculated in two different ways:
On the basis of number of days in a year: Calculation by this method involves using the monthly rental payment a lessee is expected to pay. The number of due days is converted to months by dividing it with the number of days in a year. The resulting product is converted into a month to calculate the rent.
The formula can be defined as: (Number of days due/Number of days in a year)* number of months. By calculating the fraction of month available, the rent is calculated using the monthly payable rent
On the basis of number of days in a month: In this method, the daily rent is calculated by dividing the rental income by the number of days in a month. That fraction of rent payable per day is multiplied with the number of days for which rent is due to arrive at the rent payable.
Apart from this, the agreement will contain the rights and obligations of the landlord and the tenant and the restrictions on the tenant, if any. The agreement must also address possible breaches of contract and must provide remedies for the same.
How to Draft the Prorated Rent Lease Agreement?
The following are the steps to follow while drafting a prorated rent lease:
- The landlord and the tenant will have to decide the method for calculation of prorated rent. This method should be clearly specified in the agreement so that there is no confusion at a later stage.
- The agreement should be drafted by including all the clauses that are necessary for a lease agreement.
- The landlord and the tenant must review the agreement thoroughly and make sure that the contract gives effect to the intention of the parties.
- The agreement must be signed by both parties to make it valid and legally binding.
The negotiations must ensure that each party gets a fair deal in this agreement. The agreement should not be biased in favor of any one party.
Benefits and Drawbacks of the Prorated Rent Lease Agreement
The following are the benefits and drawbacks of a prorated rent lease agreement:
- A huge benefit of this agreement is that a tenant will not have to pay a full month’s rent in case he only occupies the property for a part of the month. Thus this ensures that he does not have to pay extra money for the days when he is not occupying the property.
- Having a prorated rent clause in the agreement can also help the landlord find a tenant much more easily and quickly. It assures the tenant that the landlord is not out to make money.
[ Also Read: Rental Lease Agreement ]
What Happens in Case of Violation?
The violation of a prorated rent lease agreement will be dealt with in the same manner as the violation of any other lease agreement. The landlord and the tenant will have certain remedies under the agreement in case there is a breach by the other party.
In case the tenant fails to pay rent within the required time period or in case he causes any damage to the property, the landlord has the right to serve a notice on the tenant and ask him to cure the breach by a specific date. If the tenant fails to do so, the landlord can terminate the agreement and ask the tenant to vacate the property. The landlord also has the right to recover the actual damages and obtain injunctive relief as is required.
In case there is a breach of the terms of the agreement by the landlord, the tenant also has similar rights to protect his interests.
In lease agreements, any dispute that arises between the parties is resolved in accordance with the local laws(1).
Pro-rated rent is a delicate concept. Before drafting an agreement, you should first peruse your local and state laws that govern payment of rent, lease and contracts. This perusal will help in ensuring compliance with the laws so that you are not in any legal violation. This agreement is very beneficial to both the parties concerned. It ensures that they are on the same page when it comes to the key issues relating to the lease of the premises.