Whether you’re a renter or a landlord, you need to know the components of a lease in the Midwest so you will have a good working relationship.

What is a lease? 

A lease is a legally binding document agreed upon by both the landlord and the tenant for the use of the property as a residence. This lease comes after the tenant has been properly vetted and approved by the landlord. The terms of the lease come from the negotiations between two parties and are in abeyance of Illinois and Chicago real estate laws. 

All leases in the Midwest follow defined limits on security deposits, discrimination, tenancy duration, and responsibilities of the landlord and the tenant. As a general rule, landlords should provide a safe habitable property in compliance with local building and housing codes, including regular maintenance and supply of utilities such as electricity, heating, and water. On the other hand, tenants should keep the property clean, tidy, and free from waste, damage, and disorder. 

Remember, always have a real estate attorney check on your lease and for all my Chicago landlords - make sure that you are using the approved Chicago lease - which takes care of the basic information. Make sure you also draft riders that protect you as the property owner. 

Check out my article on the Residential Landlord and Tenant Ordinance for Chicago. 

Components of a lease 

Now that you know the basic definition of a lease, let’s talk about what I like to put in my leases to make the lease as bulletproof as possible.

The first information within any lease is about the tenant, landlord, and manager of the property. This should state the full names of all people involved in the lease. Only these people stated in the lease can handle the ins and outs of the property, and no one else should be involved without proper notice. 

B. Date of the start of the lease

Within this section, you should specify the exact date when the lease will start and the tenant takes possession of the property.

C. Location of the property

Here the lease should specify the complete address of the property to be rented out. This will lessen confusion about the living conditions of the renter. most importantly, the landlord should willingly admit ownership of the property indicated in the lease. 

Funny story: My very first unit that I have rented through an agent turned out to be not the one that was on the lease, and on the move-in day, I walked into a stranger’s unit. Apparently, I was shown the wrong unit - luckily my real unit ended up being a slightly bigger and with a dishwasher - which was a win for me. 

D. Term duration of the lease

Here you specify the exact duration of the lease from commencement to termination. Upon the latter date, the tenant is required to leave the property unless they are renewing the lease. At Nex-Gen we add an option for renewal for one extra year without any changes to the lease. We typically ask about the renewal option 3-2 months in advance, just to get any unit turnover on the books. 

If the landlord has a property manager, the lease should include their full company name and the role of the property manager in enforcing the provisions of the lease on behalf of the landlord, and making it super clear that the property manager is their main contact. 

Next comes the most financially contentious of the lease - the rent details. Here, the landlord should specify the exact rental rate and the recourse in terms of non-payment.

Specify exactly how much is the rent, when it is due, the form of payment and to whom to send payment on the due date.

Addressing Delinquent Rent and Returned Checks

In this section, you should specify what happens when the renter fails to pay the rent on time or the payment fails because of bounced checks. this part must abide by the local landlord ordinances in the city where the property is located. Each city has different specific limits on how much fees can be charged to the renter to ensure good faith between the two parties.

Security deposit

A. How much is the security deposit?

Security deposits and move-in fees can be tricky - especially here in Cook County and Chicago specifically, so please be mindful. For example, according to Chicago law, the security deposit cannot exceed two months' worth of rent. The landlord is required to store the security deposit in a separate interest-bearing account.

B. Reasonable deductions from the security deposit

Aside from unpaid rents and bills, the landlord may deduct the following charges from the security deposit: returned check charges, cleaning and repair costs, replacement costs for damaged or lost furniture, removal of unauthorized fixtures installed by the tenant, and attorney fees and costs of court incurred in any proceeding against the tenant.

Rules about using the property

This component is the longest part of the lease because it entails what the landlord and tenant can do during the lease. For the tenants, this includes using the property only as a residence or place for family members to stay in, keeping the premises clean and safe, paying for utilities, and taking care of pets. The landlord, on the other hand, should deliver the ownership of the property upon commencement of the lease and comply with all local real estate laws. 

Are short-term rentals or subletting allowed?

This part should refer to the local real estate laws regarding short-term rentals and sublets. If the renter violates the laws expressly, this would terminate the lease. I personally, do not allow short-term rentals and subletting unless the new tenants have gone through our application process.

Renovations

This part should specify which alterations, improvements, or renovations of the property the renter can make. 

I also like to mention which hazardous chemicals and materials won’t be allowed on the property.

Paying for utilities

It should be clearly stated in the lease, what utilities the tenant is responsible for.

Maintenance and repair

You need to include the things that the tenant should and should not do to maintain the property’s good, habitable condition. This includes cleaning the home from top to bottom, refraining from changing anything in the home without the express permission of the landlord, and living in harmony with the community.

State exactly to whom and when repairs should be reported, and snow and ice removal duties.

When the property is damaged?

This part should include what happens when the premises get destroyed by natural calamities, including any rental changes should the property be inhabitable. If the property gets damaged through the tenant’s fault, the landlord should also specify how much the tenant should be responsible for.

I. Regarding pets

Given that there are many pet-friendly properties available for rent in the Midwest, the lease should include the type of animals allowed for that particular home. and of course, the pets also mean an additional non-refundable deposit tacked on to the initial costs of the rent at our company. 

If the property falls under the jurisdiction of a Homeowners’ Organization, the lease also shows how the tenant is subject to the by-laws and rules and regulations of that HOA. Failure to follow these rules may result in a default under the lease.

Disclosures - The lease should also include specific disclosures about the property. For instance, lead-based paint disclosures, radon, bed bugs, and mold disclosures are typical in our state. 

Finally, the landlord, property manager, and tenant should affix their signatures to the lease document. Otherwise, the lease is null and void. Each signatory should keep a copy of the signed lease for record-keeping purposes.

Conclusion

And there you have it - the basic components of a lease in the Midwest. Depending on the local real estate laws, the type of residential property rented and the location of the property, there could be other clauses and provisions in the lease. 

Whether you are a landlord or a tenant, what you need to do is to review the lease document from start to finish and pay attention to the fine print. This will help you have a good relationship with the other parties involved. and of course, prevent any conflicts within the community itself.