Leases

What is the difference between a written and verbal lease?  A fixed-term and a month-to-month lease?  What are illegal lease clauses?  Want to break a lease?  Read this section.


What is a Lease?

A lease is any verbal or written agreement between two or more people for the rental of property.  It includes the terms and conditions under which the property is rented. If the owner sells the property during the lease period, the new landlord must honor the lease made by the old landlord.  Both the landlord and the tenant are entitled to a copy of the lease.

The two basic types of leases:

1. Fixed-term (usually yearly) has a specified starting and ending date. The monthly rent is fixed and may not be changed during the course of the lease.  However, landlords may change the rent with 30 days notice ONLY to compensate for an increase in the rate of utilities or taxes, and then only if such possible increases have been stated in the lease.  Leases for less than one year cannot waive tenants' rights, but in some cases, leases written for longer than one year can waive some tenants' rights, particularly in regards to repairs.  Most written leases have a "joint and several liability" clause that makes all tenants who signed the lease responsible for the entire rental agreement.  Therefore, for example, if one tenant fails to pay their portion of the rent, the other tenants can be held responsible for paying it.

2. Month-to-month is automatically renewed at the beginning of each month when the tenant pays the rent and the landlord accepts it.  Either the tenant or the landlord may terminate the lease by giving a minimum of 30 days written notice. The 30 days notice can be given on any day of the month, except when there is a lease clause which specifically states that notice of termination must be given on the first or last of the month.  Landlords may increase the rent as long as they give written notice at least 30 days prior to the increase. Verbal agreements (leases that are not in writing) are considered month-to-month leases.

Illegal Lease Clauses

Two important state laws in Michigan protect tenants from illegal lease clauses:

  • The Consumer Protection Act protects consumers (including tenants) from unfair trade practices in any business transaction. This act makes illegal any lease clause or representation concerning the lease, the unit, or ownership, that misleads or confuses tenants about their legal rights and obligations.

  • The Truth in Renting Act prohibits lease clauses that waive a tenant's legal rights. The act also requires that all leases include the landlord's or manager's name and address, and a notice about the Truth in Renting Act.

Before Signing the Lease 

Read the lease carefully before signing it. If you have questions about anything, have a tenant advocate read it over before you sign it.  Landlords often insert illegal clauses in order to intimidate tenants from exercising rights.  However, many of these clauses are illegal and unenforceable, regardless of whether or not you signed the lease. Do not be intimidated by illegal clauses just because you may have already signed a lease.  If you are concerned about a particular lease clause, check with your tenant organization or an attorney, or ask the landlord to strike it from the lease. If you are afraid the landlord might rent to someone else if you challenge something illegal in the lease, you CAN go ahead and sign the lease.  Once you move in, you will have more leverage to get illegal clauses removed.  Although such clauses are unenforceable, the lease itself is still binding under most circumstances.

What If Your Lease Has Illegal Clauses?

Just because you sign a lease does not mean you agree to an illegal clause in it.  If you have signed a lease that includes clauses prohibited by the Truth in Renting Act, there are steps you can take after you move in to demand that they be removed from the lease:

  1. Write a letter to the landlord requesting that any illegal clauses be stricken from the lease.

  2. If the landlord fails to remove the clauses within 20 days after your letter, you may begin court proceedings to

  • terminate your tenancy

  • stop the landlord from including the provision in any future or current leases, and/or

  • recover damages of $250 or actual damages, whichever is greater. Similar provisions ($500 instead of $250) hold if the landlord has failed to include his or her name and address, or the notice about the Truth in Renting Act, in your lease.

What Clauses Are Illegal?

Illegal lease provisions include those that would:

  • Waive the right to a clean, habitable dwelling;

  • Allow the landlord to change the terms of the lease in the middle of the lease period (for an exception, see "fixed term" or yearly lease above);

  • Exclude or discriminate against a person in violation of the Elliott-Larsen Civil Rights Act of 1976 or the Persons with Disabilities Civil Rights Act of 1976;

  • Waive the rights established by the security deposit law (see our section on Security Deposits);

  • Violate the Consumer Protection Act (see above for an explanation).

Examples of Illegal Lease Clauses:

  • "Tenant agrees to pay cost of legal actions initiated by the landlord.""  Under Michigan statutory and case law, only minimal statutory costs, not actual attorney's fees, can be assessed against the losing party in most lawsuits.  Attempts to change this law by a lease are void. (MCL 600.5759)

  • Waiver of legal notice and/or legal proceedings. This type of clause says that if you fail to pay your rent or abide by the terms of the lease, the landlord can declare the lease void and evict you without the legally required notice or due process.  However, any waiver must be intentional and voluntary.  Because tenants usually do not know what rights they are giving up and they do not bargain for leases, a valid waiver of rights is rarely valid.  If tenants do not knowingly waive their rights, such clauses are illegal and unenforceable.

  • Clauses that say tenants must pay rent whether or not the landlord repairs and maintains a dwelling are known as "separation of covenants" and are illegal.  By Michigan law, in every residential lease landlords must keep the unit habitable, in reasonable repair, and in compliance with all local and state housing laws. Such promises cannot be modified in leases of less than one year.  Most Ann Arbor leases are a few days less than one year. (Implied Covenant of Fitness, MCL 554.139)

  • "Tenant agrees to take the premises as they are." This means that once tenants sign the lease, they give up the right to object to the condition of the premises, appliances, or furniture.  However, the same legal objections apply as above.

  • "Landlord disclaims liability for damage to property or for personal injury."" According to Michigan case law, landlords cannot use lease clauses to remove themselves from liability for negligence. The state's Truth in Renting Act also specifically prohibits this. (MCL 554.633(1)(e))

    Many things landlords add to it are illegal.  Be careful of addenda or extra clauses written in by the landlord.

Breaking a Lease

Breach of covenant 

In this situation, the tenant is breaking the lease because the landlord violated the terms of the lease.

To prove that the landlord did not uphold the contract and thus broke the lease, you will need a well-documented history of serious repair problems or landlord harassment. Write a letter to your landlord stating that she or he has not provided maintenance, what the problems are, how often you contacted your landlord about the problem, and how she or he responded.  Include copies of inspection reports, etc. You should give the landlord notice of when you will be moving out.

If you believe your landlord broke the lease and you wish to move out, contact your tenant organization or an attorney.

The tenant is breaking the lease without subletting.

If you wish to break the lease, you should inform your landlord in writing as soon as possible. Your landlord is obligated by law to try to find someone to move in, in order to mitigate damages. The landlord should advertise the vacancy in the newspaper, etc.

If the landlord's attempts at finding someone else to move in are unsuccessful, you may be held responsible for rent for the time the place stays vacant. The more notice the landlord has, the less likely it is that you will have to pay. Once the landlord signs a lease with someone else through the end of your lease, you are no longer responsible for the lease. There is a possibility that, if the landlord signs a lease with someone else for a lower dollar amount, you would be responsible for paying the difference. You may want to help look for a new tenant, thus reducing the risk of getting stuck with the lease.

Early Termination Fees 

Some leases have clauses requiring that the tenant pay a certain amount of money for terminating the lease early. If this fee is higher than what re-rental would actually cost the landlord, consider refusing to pay it.  For example, three months rent is probably not reasonable. If the amount is reasonable, you may opt to pay it so as to walk away from the deal without any worries. In any case, you should put any agreement you reach with the landlord in writing.

Subletting 

Subletting is one of the most common ways a tenant can get out of paying full rent for a place in which they do not wish to live.  When you sublet, you essentially become a landlord. You negotiate a contract with a subtenant and you may collect a security deposit from the subtenant.

The landlord may require in the original lease that the tenant get their approval before subletting.  However, a landlord may not unreasonably withhold approval of a subtenant.

One disadvantage of subletting is that, if the subtenant does not pay all of the rent, the landlord can hold the original tenant responsible. The original tenant would have to sue the subtenant for rent money or take it out of his or her security deposit.

Look at your current lease for ideas of lease provisions.  Subtenants have the same rights as tenants.

Lease assignment 

In this method of getting out of a lease, you and the landlord agree to transfer all of your lease rights and duties to another person.  Unless specifically prohibited in the lease, you may reassign your lease, but in many cases you need the approval of the landlord to do so.  In lease assignment, you are no longer responsible for the terms of the lease, and the landlord has more control over who the new tenants will be.  A landlord is more likely to be amenable to an assignment if the tenant tells the landlord that they are moving out of state.  In such a case, the landlord may conclude that she or he is unlikely to collect rent if the subtenant or original tenant does not pay.

To learn more about housing rights in Michigan and where to get help:    

Consult the Michigantenants.org website for local housing resources and tenant counseling services. 

Consult the Michiganlegalaid.org website for legal education articles and local service information.

If you received court papers or otherwise need free or low cost legal advice:

This article appears courtesy of the Michigan Tenant Counseling Program.