Renting doesn’t always mean signing a lease. But not having a lease doesn’t mean there aren’t any rules.
A simple oral agreement can seal a deal and be every bit as binding as a written document. So, even if you decide not to sign on the dotted line, you still have obligations and rights-and so does your landlord.
“In Chicago, oral agreements are still covered by the landlord-tenant ordinance, which sets forth the rights and responsibilities of both parties,” says William Wilen, an attorney for the Legal Assistance Foundation in Chicago. “Outside Chicago, the relationship is governed by state laws.”
For example, no-lease landlords must still follow laws regarding habitability (heat, hot water, security, etc.), security deposits and access to the apartment. But they can get around the laws regarding subleases and evictions because those apply only to long-term agreements.
The big difference between oral and written rental agreements is that written leases cover a specified time (usually a year) and set the rent. An oral, or no-lease, contract can be changed by either party with 30 days’ written notice.
According to Wilen, not having a lease has advantages and disadvantages, for the renter and the owner. The advantage is flexibility. Either party can easily terminate the agreement.
The disadvantage is the lack of security. Without a lease, neither party can be sure what the next year will hold. With just 30 days’ notice, a tenant could discover that the rent is rising, that his pet is no longer acceptable or that he needs to find a new place to live.
Who goes lease-less?
There are a lot of reasons that renters choose flexibility over security. For example, there are actors who could get called away on assignment, people who move to the area but aren’t sure if they will stay or people in the process of buying a house who are unsure when they will need to move.
However, renters going around asking for a no-lease agreement are likely to get a cool reception.
“We don’t offer no-lease agreements, because landlords don’t want them,” says Yehuda Cohen, president of Amquest, a rental agency in Chicago. “They want to know that the apartment will be rented for a certain length of time, at a certain price.”
Rather than calling rental agencies or large management companies, if you want want such flexibility, you should focus on the smaller properties and meet with the owner or manager before suggesting a month-to-month lease. Come armed with letters of recommendation. Also, look for rental properties that are for sale and call the real estate agent. Ask if there are vacant units that might be available on a monthly basis. If they are unsure, ask if you can talk directly to the owner.
Also ask friends and relatives if they know of landlords with vacancies. If the owner knows you or feels he can trust you, he is more likely to accept a month-to-month agreement.
Cohen suggests that it’s easier to get a no-lease agreement by convincing a current landlord to let you remain in your apartment on a month-to-month basis.
Or you can move into an apartment where someone else signs the lease, such as a roommate (many landlords, however, will require both roommates’ signatures on the lease).
“There have been a few times when a lease expired and the tenant wanted to stay for a few months, so we just went month-to-month,” explains Marc Schwartz, who owns a three-flat in Chicago.
Schwartz has also found situations when it’s to his advantage to have no-lease arrangements.
“My second-floor tenant is renting the attic as a painting studio. It was part of his lease agreement,” Schwartz says. “I was thinking about duplexing my unit, on the third floor, into the attic, so when his lease expired this summer I recommended that they have a no-lease agreement. This way, if I decide to remodel, I can. To make the month-to-month agreement more palatable to the tenant, I didn’t raise the rent as much as we originally planned.”
Landlords may also suggest no-lease agreements to give them some flexibility in selling or converting a building, or if they want to “test” a tenant before offering a year’s lease. If the tenant proves to be unacceptable, the landlord can look for other tenants and re-rent the apartment, if he provides 30 days’ notice.
Sometimes longtime renters find themselves without a lease simply because the landlord hasn’t gotten around to asking them to sign a new one. In that case, you may want to discuss the situation with the landlord and make sure he is aware that both sides are operating under a no-lease agreement.
Payment equals agreement
Without the paperwork, the no-lease rental agreement is established when the tenant makes a rent payment. In most no-lease agreements, a security deposit is also required.
“By accepting a rent payment, the landlord is accepting the tenancy, even if there is no written lease. As long as both parties adhere to their obligations under the law, the tenant is entitled to stay in the apartment,” says Wilen. “For example, if rent is paid on Nov. 1, then the tenant is entitled to the apartment for that month; plus, it’s implied they will stay in December.”
“Unless the tenant provides a 30-day written notice that they are moving, or a landlord provides a 30-day notice that the tenant should vacate the apartment, then it’s implied the tenancy will continue,” he says. “The law recognizes this type of no-lease agreement for one year. After that, the terms need to be re-established or something needs to be signed.”
Law takes priority
In Chicago, at least one management company has decided that leases are irrelevant.
“Our owners don’t offer written leases,” explains Miriam Hunter, an agent with Oscar C. Brown Real Estate Corp., which manages a few apartment buildings in the Washington Park area of the South Side.
Hunter says a lease can be full of illegal provisions that would not stand up in court, even though it is a signed document.
In lieu of a written lease, Hunter says, owners she works with have an oral agreement with tenants, and both parties understand their rights and responsibilities under the Chicago Landlord-Tenant Ordinance. By law, even no-lease tenants must be provided with a summary of the ordinance.
“If there are special rules or procedures that apply to a building, the owner will explain these to a tenant and there is a signed letter that these rules were discussed and understood,” Hunter says.
“I think if both sides respect each other and follow the law, leases are not really necessary. For instance, I have found that if there are rent increases, they are no more frequent than once a year,” Hunter says. “Also, most tenants moving out will give appropriate notice. If anything, they provide notice and are not able to move when they thought they would and end up staying longer.”
Still, write it down
One drawback to no-lease agreements is that neither party may have legal recourse if problems develop. Without a written record of the agreement, it’s hard to prove an agreement actually existed.
To protect both sides under a no-lease agreement, Wilen offers these suggestions: Get receipts for rent and security payments and pay by check if possible. Have witnesses on hand for any conversations regarding the agreement you have with the landlord. Make notes about any oral agreements and send letters that explain what you understand the agreement to be. Keep copies of any written correspondence. Get a copy of the Chicago Landlord-Tenant Ordinance (available at City Hall) and understand your legal rights.
One option to the no-lease agreement is a written lease that includes a 30-day escape clause. According to Wilen, “It’s better than an oral agreement because it sets forth all the responsibilities of both parties while keeping the option to end the agreement with 30 days’ notice.”
