What is a Leasing Agreement?
All rental agreements are contracts, so they share some things in common with other types of contracts, such as sales contracts. However, rental agreements for residential real estate have some characteristics that make them distinct from other contracts.
First, rental agreements tend to be longer than many other contracts, typically running from month-to-month or year-to-year rather than just for a single transaction. These longer terms create stability, allowing the landlord and tenant adequately to plan for the future.
Second, most rental agreements are "standard form" contracts rather than individually negotiated. This means that the landlord uses the same rental agreement for all of its tenants. Although the tenant usually has the option of declining to sign the agreement if he or she does not like the terms, there are very few opportunities for negotiation. This is of course good for the landlord, who can have a single agreement to cover all of its properties.
Despite being "standard form," some rental agreements (especially in non-residential leases) do provide for negotiation by allowing the landlord to "define this relationship" at a later date. Such provisions include phrases such as "to be agreed upon in writing." However , many landlords would oppose any tenant attempt to use such a provision as a way to escape from the obligations of the rental agreement. Some landlords would argue that these provisions should be strictly construed; i.e., the landlord’s later agreement creates a new contract, and parties seeking the agreement are free to orally contract, just as they had done before.
Third, many rental agreements provide for an "escape clause" allowing either the landlord or the tenant to terminate the agreement on a short timeline, usually 30 days to one year. Such clauses are often exercised by tenants even in the presence of a "long-term" rental agreement. Because of other special rules for residential property, it makes good financial sense for many landlords to offer "with cause" termination clauses, even though these clauses add risk that the tenant will leave early.
Finally, many rental agreements say nothing about the business actually conducted on the property. This makes it more difficult for the landlord to terminate the agreement for "business reasons." In other words, although lease agreements can be valued as business assets, the owner of the assets often lacks the ability to control significant elements of the business. This creates a disadvantage for the landlord.
Form Requirements for Leasing Agreements
Legal Requirements for rental agreements vary from state to state. In general, they must include certain elements to be valid. For example, the names of the landlord and tenant(s) (including their signatures), the address of the property, names of all individuals who will be living in the property, how long the lease will be in effect, how the rent will be paid and when, and the rent amount are common elements in an agreement. Some states have additional requirements such as the posting a bond and listing repairs that the landlord will maintain.
Some states require a rental agreement to be in writing if it is for more than a year and some do not. The U.S. Department of Housing and Urban Development website has more information about state requirements.
The Role of Notarization
Notarization is a process intended to deter fraud in document signings. A notary public is an independent third party—a lawyer, usually—who can verify that:
The Notary’s job, and the same goes for apartment buildings, is to look at the person and the ID and confirm in writing that you are you. They do this by completing a notarial certificate, which is an official form bearing the Notary’s signature and seal.
Notarization is free in New York, and should take a few minutes at most. If your Notary asks you for a fee, look elsewhere.
You may want to ask the Notary to void the previous agreement. Not all Notaries will.
The important thing to remember is that if you have to go to court, the notarized agreement is presumed valid. You may have a tougher time arguing that an un-notarized agreement is invalid.
There are many reasons documents – such as agreements – are notarized. A Notary will first identify the parties, and witness the signing.
A Notary often has to look at the witness’s ID, to prove that the Notary actually witnessed the signing. The Notary may also write down in a logbook details of the signing for the record. This gives the Notary a way to track of when and where the signing occurred.
Your Notary will sometimes make a copy of the agreement with the signatures on it, and keep it in their files. That way, the Notary can easily find it to show to a court.
Is Notarization of a Leasing Agreement Required?
Notarization of Rental Agreements
So, is notarization required for a rental agreement? To answer this question let us first analyze some fundamental misconceptions regarding notarization in the context of Germany. Many people think that notarization and form requirements are the same thing. However, there often is no requirement for notarization for contracts in Germany. For certain contracts notarization is only necessary where the contract entails certain form requirements. Notarization per se implies a written contract. Verfahren oder Form (§ 125 BGB) – In German: No 125 BGB – In English: Documentary requirement. Certain contracts are only effective if they are entered into in a particular form, e.g. in writing, e.g. not verbally as per секр. 125 BGB. Such a form requirement is called a "Verfahrens- oder Formvorschrift" in German. These may be the result of a commercial regulation or a consumer protection measure. Where such form requirements are related to consumer rights, they may also be designed as a warning system or a default option (Regelfall) to enable to consumer to be justly treated but exquisitely informed of consequences of a regulation. Certain consents can only be given in writing, but contract partners are free to verify these consents via an online registration, i.e., without noticing a written consent.
Many people believe that notarization of a contract includes the certainty of such contract being compliant and effective as such. Notarization really only has the task of authenticating a legal transaction, as well as supplementing certain form requirements.
Basically, a rental agreement is only effective if entered into in writing. Written form is considered satisfied where the contract is executed on paper or electronically (German Electronic Commercial Code (E-Commerce, "Gesetz über elektronische Handelsregister und das Unternehmensgrundbuch sowie das Unternehmensregister", § 126a HGB) and is signed both by the landlord and the lessee. If this form requirement is not met the contract will be deemed invalid.
However, a rental agreement does not require the formal notarization to become effective, only in cases where its effectiveness is conditioned to be notarially certified, will it require notarization; e.g., in a case where a contract is entered into with several parties. One such example is a multi-party tenant association where the safety deposit is shared by the entire group of tenants. In other words, in each case where the rental agreement involves the participation or confirmation of at least three parties, or if several leases are consolidated, notarization is advisable.
Variation in Notary Requirements Across States
The requirement of notarization is not necessarily uniform across all states, a fact that landlords know extremely well. While a number of states do require certain deeds and documents to be notarized to be valid and enforceable, other states require notarization only if there are additional circumstances. There are still some states that do not have notarization requirements.
For instance, the law in Hawaii does not require a deed to be notarized. However, many local title companies or other third parties require notarization for practical reasons. And a number of states only require notarization for deeds of trust or mortgages. (Arizona, California, New Mexico, and Nevada all require notarization for those security agreements).
California has a different approach than its neighbors. Its laws state that a deed must be "acknowledged" (a term that is sometimes used instead of "notarized") or witnessed. New Mexico also requires a signature to be witnessed , similar to the laws in the state of Washington. Similar to California and California’s neighbors, Kansas, North Dakota, and Tennessee require notarization or witnesses. Some require either, but none of these states require both.
The most confusing aspect of notarization comes when a document is signed in a state but must be recorded in another. In some circumstances, a deed must be notarized in order to be valid in another state, while other times an acknowledgement or witnesses may be sufficient. Therefore, before endorsing or signing a deed (or other document) in one state for use in that or another state, it is imperative to become familiar with the state laws.
Benefits of Notarizing a Leasing Agreement
While notarization of rental agreements is not mandatory, there are numerous benefits to voluntarily having your rental agreement notarized, which are often overlooked. When you sign a rental contract, you are legally binding yourself to that contract, and there are significant rights in Texas that accrue to landlords and residential tenants. As such, it is vital for both parties to establish that they have full authority to sign the contract that binds them to their respective obligations. A landlord should consider requiring that a tenant sign a rental contract in the presence of a notary. This accomplishes two benefits: 1) the landlord has insurance against a misrepresentation as to the ability of the tenant to sign the agreement, and 2) the landlord has the benefit of knowing that the tenant is fully aware of the requirements of the contract and the landlord’s expectations of the tenant under the contract. For example, many landlords offer to pay a reward so long as the reward is not due to an act of omission by the landlord (e.g., not picking up trash in common areas). If the tenant is signing under a notary, the tenant has been advised of the landlord’s expectations of them the tenant in order to be eligible for the reward; whereas if the agreement was signed on its own without a notary, the tenant would have no such assurance or warning. By taking the extra step to notarize your rental agreement, you can help ensure that the expectations, obligations, and personal information of both parties is properly executed and verified.
Drawbacks of Notarizing a Leasing Agreement
The cons of notarizing agreements have more to do with cost and time than anything else. For truly a very small amount, you might be able to get the notarization as part of your free community college offer under the new law for free classes. If not, however, it is difficult to know the actual cost of a notary where you live. Most notaries charge for time – usually about $10-$20 per signature in the rental agreement and $5-$10 for any attachments. For instance, the unit addendum might be two pages, the lead walks might be five pages, etc. So you could end up spending $150 on the signatures just for a couple months rental agreement.
The other possible downside is simple. It takes time to sign and notarize the rental agreement. If this is you and your non-subscribers, perhaps a landlord you are leasing with, it could be a couple of hours of running back and forth to get things signed. That makes it a pain for something that hopefully you will only do once in a long while.
Conclusion and the Take-Away
The overall consensus in this post is that landlords should not be concerned about whether or not they have a notarized rental agreement with their tenants. There is no requirement in law that the rental contract must be notarized – only that the parties have agreed on the material terms (rental rate, term, parties, and description of use). If you have entered into a written rental agreement containing these material terms, the contract is valid and enforceable against the other party, regardless of whether it is notarized.
But we also discussed in this post how having a notarized rental contract would appear to be in the best interest of all parties involved. Although notarization is not required, it can add another layer of protection to your lease. We discussed how this protection was evidenced in the recent case of Watson v. Campagne, where the landlord had a notarized rental contract with the tenant. The notarized agreement trumped the tenant’s claims that he "forgot" to pay his rent, that he overpaid for the first couple of months, and that he was entitled to a return of his prepaid rent upon vacating .
For that reason, we recommend that tenants insist on a notarized agreement, and that landlord’s be agreeable to that – it appears to be in their best interest for that agreement to be notarized. A quick review of the websites of several of the largest property management firms in the Valley indicate that the largest property managers are already doing just that.
I would recommend that any landlord who is not currently requiring notarization require that his rental contract be notarized by both the landlord and the tenant. And as an added measure of protection, I would include a clause in the rental contract requiring that it be notarized.
If you do not have an attorney preparing your rental contract, you can find notaries at banks, the post office, UPS stores, and your local records building. Getting your rental contract notarized should not take more than an hour once your landlord or tenant has signed it.
If you are considering notarizing your rental contract and need assistance with this decision or its implementation, contact an experienced lease attorney.