What is an Oral Lease Agreement?
An oral lease is defined as a lease agreement that outlines the legal rights and responsibilities of either party, but is not written and instead agreed upon only verbally. While verbal leases are not recommended as they can leave both parties vulnerable, they do occur, so it is advantageous to know the pros and cons of these types of agreements.
Oral Lease Agreement Pros
Oral leases can be easily changed, and easy to change on short notice. For example, if there is an oral month-to-month lease in place and the tenant wishes to end the agreement, they only need to call the landlord and let them know. Likewise, if a landlord wishes to terminate the agreement they can just phone the tenant and let them know verbally.
Oral leases can also be very advantageous to tenants since many written leases favour landlords. Written leases tend to contain more provisions, qualifications, and responsibilities. Oral leases tend to be simpler and easier to understand.
Cons of Oral Lease Agreements
As the rule goes, always get things in writing, and this holds true for lease agreements for various reasons. Without a paper copy of a lease agreement to look back on, it can be difficult to determine what the terms of the lease are at a later date if the landlord and the tenant have a misunderstanding about the lease terms.
There may also be situations where one party does not act in good faith and tries to manipulate or alter the contract to their advantage, which is possible because there is no written record of it. For example, a tenant who entered a year-long lease with the landlord may try and claim the lease was on a month to month basis. Without a written lease, it could be difficult for the landlord to prove otherwise.
Why are Oral Leases not recommended?
While oral leases are usually enforceable under legal action they are not ideal as they do not provide any permanent written record of terms should any issues arise later.
Return to the main Glossary of Commercial Leasing Terms