Comprehensive Guide to Drafting a Proper Lease Agreement
A precise and well-structured lease agreement is one of the most important legal measures for preventing future disputes between landlord and tenant. In recent years, a significant number of cases brought before Dispute Resolution Councils and courts have arisen from ambiguities or shortcomings in lease agreements. The 1403 amendment to Iran’s Landlord and Tenant Relations Law also emphasizes the need for clear contractual provisions and the issuance of a tracking code. These developments indicate the legislator’s intent to reduce conflicts and increase transparency in lease relationships.
A properly drafted lease agreement can clearly define the rights and obligations of both parties. Who is responsible for paying utility bills? Is the tenant permitted to move heavy equipment into the unit? What are the conditions for renewal? And many other essential matters.
Neglecting such details may lead to forced eviction, financial loss, or legal complications. If you seek peace of mind and legal security, you should give careful attention to drafting a lease agreement in compliance with the law.
Who Is Authorized to Enter Into a Lease Agreement?
Under Article 10 of the Iranian Civil Code and the general principles governing contracts, any person who has legal capacity, meaning maturity, mental competence, and free will, may become a party to a lease agreement. Regarding the landlord, the individual must be the registered owner of the property or the owner’s legal representative. If someone leases a property without holding valid ownership documentation, the tenant may face substantial risks, including the inability to register the agreement or the possibility of sudden eviction.
On the other hand, the tenant must also have the legal capacity to undertake contractual obligations. If the tenant is under the legal age or lacks mental competence, the lease agreement may be deemed invalid. The 1403 amendment emphasizes the importance of verifying the identities of both parties and reviewing their identification documents. Therefore, to prevent fraud or abuse, the parties’ identification documents, proof of ownership, and legal capacity should be carefully examined before signing any agreement.
Key Components of a Standard Lease Agreement
A standard lease agreement should include several essential sections to be legally valid and enforceable. These elements should be drafted with care and uploaded to the property transaction registration system.
- Parties’ Information: Full name, national identification number, identification document details, phone number, and complete address.
- Property Details: Exact address, registration plaque number, area, number of rooms, designated use (residential, commercial, and others), and special features or amenities.
- Lease Term: Start and end dates, and whether renewal is automatic or subject to a new agreement.
- Rent and Deposit: Monthly rent, deposit amount, and payment method (cash, bank transfer, and others).
- Parties’ Obligations: Responsibilities regarding repairs, payment of utilities, insurance, and proper maintenance of the premises.
- Termination Provisions: Circumstances under which either party may terminate and the legal consequences.
- Tracking Code: Issued through the real estate transaction registration system and considered legally significant.
These elements should be stated clearly and without ambiguity to prevent misinterpretation or improper use.
Determining the Lease Term, Rent, and Core Conditions
The lease term and financial provisions are among the most critical parts of the agreement, and even minor mistakes in these areas can lead to serious disputes. Under the 1403 amendment to the Landlord and Tenant Relations Law, all lease agreements must have a defined term, meaning the start and end dates must be expressly stated. Leases without a specified term are considered legally unclear, and interpretation becomes difficult in the event of a dispute.
Rent terms must also be stated precisely, including the monthly rent, deposit amount, payment schedule, due dates, and any late-payment penalties. If payments are made by bank transfer, it is advisable to attach payment receipts or bank confirmations to the agreement. The agreement should also clarify whether the rent may increase during the lease term. In certain areas, guidelines issued by the Ministry of Roads and Urban Development may set limits on permissible rent increases, which should be observed where applicable.
Legal Safeguards for Landlords and Tenants
To prevent disputes and protect both parties’ interests, the 1403 amendment provides safeguards for landlords and tenants.
- Safeguards for the landlord: The landlord may request a guarantor, a promissory note, or another credible guarantee to ensure that the tenant pays rent on time, vacates the premises as agreed, and does not cause damage. Registering the lease in the official system and obtaining a tracking code also strengthens the landlord’s legal position in the event of a breach.
- Safeguards for the tenant: A formally registered lease with a tracking code helps ensure that the landlord cannot obtain an eviction order without a valid legal basis. Moreover, if the property suffers a fundamental defect, such as a serious plumbing or heating system failure, the tenant may require the landlord to perform necessary repairs.
Recording these safeguards in the agreement, particularly through clear and enforceable clauses, plays an important role in reducing tension and improving legal enforceability.
Termination by the Landlord or Tenant Under the Updated Law
Termination of a lease is often one of the most contentious issues in rental relationships. Under the 1403 amendment, unilateral termination is permitted only in limited circumstances. The landlord may terminate and seek eviction in situations such as:
- Failure to pay rent on time for more than two months.
- Unauthorized use of the property, such as converting a residential unit into commercial use or engaging in unlawful activity.
- Intentional damage to the premises.
The tenant may also seek termination in circumstances such as:
- The landlord’s failure to perform essential obligations, including major repairs.
- An eviction ruling issued by a judicial authority due to the landlord’s lack of legal standing or an unlawful transfer of the property.
In all cases, termination must be pursued through the relevant legal authorities, such as the Dispute Resolution Council, and verbal statements alone are not sufficient. It is strongly recommended that termination clauses be drafted clearly and specify all conditions in detail.
Essential Points for the Eviction and Vacating Clause
The vacating clause is one of the most crucial sections of any lease agreement. Lack of clarity in this clause can result in major disputes and even litigation. The agreement should clearly specify the timeframe within which the tenant must vacate at the end of the lease term or following lawful termination. It may also provide for a contractual penalty if the tenant delays vacating, for example, a daily amount equal to one-thirtieth of the monthly rent.
The agreement should state that delivery of the keys to the landlord or the landlord’s legal representative constitutes the end of the lease relationship. Without key delivery, the lease may be considered ongoing. It is also advisable to specify the exact time of day for vacating to facilitate enforcement and reduce the risk of disagreement.
Formal vs. Informal Lease Agreements and the Advantages of Each
Lease agreements in Iran generally fall into two categories: formal and informal. Understanding the differences helps parties make an informed choice.
- A formal lease is executed and registered at a notary public office and provides strong enforceability. In the event of a dispute, eviction may be pursued through the Registration Organization, and the process often does not require court proceedings. This form is typically recommended for high-value properties, long-term leases, or circumstances where enhanced legal security is desired.
- An informal lease is usually drafted by a licensed real estate agency and often includes a tracking code. This type of lease is legally valid, especially when supported by a tracking code. However, disputes generally require judicial review. Under the 1403 amendment, registration in the real estate transaction system and the issuance of a tracking code are now required for informal leases to reduce misuse.
Repair and Maintenance Responsibilities in Lease Agreements
A frequent question in lease agreements concerns who is responsible for repairs. The answer depends on the nature of the repair and should be clearly stated in the agreement.
Under Article 20 of the Landlord and Tenant Relations Law, major and structural repairs, such as plumbing, electrical systems, roofing, walls, and heating or cooling systems, are generally the landlord’s responsibility unless otherwise agreed. Minor repairs, such as replacing light bulbs, door handles, locks, and faucet hoses, are usually the tenant’s responsibility. The 1403 amendment highlights the need to define these responsibilities precisely. For example, the agreement should clarify who pays for repairs if the boiler unit fails or if the air conditioner stops working. Including detailed repair obligations prevents misunderstandings and future disputes and supports a respectful and cooperative relationship.
How to Register a Lease Agreement at a Notary Public Office
Registering a lease agreement at a notary public office provides significant legal protection. The lease is prepared under official supervision, and the parties benefit from multiple legal advantages. To register a formal lease, the following documents are typically required:
- Title deed of the property or an official power of attorney.
- National identification card and identity documents of both parties.
- Full property details and the agreed lease terms.
- Payment of the notary’s office fees.
After reviewing the documents, the notary public prepares the lease deed, and both parties sign it. A key advantage of a formal lease is the ability to obtain an eviction order without going to court. In 1403, formal registration was considered mandatory for commercial properties and is strongly recommended more broadly, as it may serve as a highly reliable document in legal proceedings. Although notary registration may cost more than informal arrangements, the resulting legal security is often far more valuable.
Critical Notes on Rent Increases and Lease Renewal
Renewal and rent increases are among the most common issues in lease relationships. If not properly addressed in the initial agreement, they may lead to serious disputes and even forced eviction. Under the amended law, if the agreement includes a renewal clause and rent adjustment conditions, both parties must comply with those terms. If no such clause exists, renewal generally requires a new agreement or the written consent of both parties.
The agreement should specify:
- The percentage or method of rent increase upon renewal.
- Whether renewal requires a new agreement or occurs automatically.
- The parties’ rights if they cannot reach an agreement.
In some cities, legal caps on rent increases may apply under relevant governmental decisions that remain effective in certain areas. Properly drafting this clause reduces disputes at the end of the lease term and increases predictability for both parties.
How to Obtain a Valid Guarantee From the Tenant
To prevent tenant breaches, such as non-payment of rent or delay in vacating, many landlords request guarantees. A guarantee is effective only when it is clearly and lawfully documented in the lease.
Common forms of guarantees include:
- Guarantee checks or promissory notes for rent and potential damages.
- A reliable guarantor with identification documents and proof of income.
- A cash deposit, part of which may serve as security for damages.
The agreement must expressly specify:
- The purpose of the checks or promissory notes.
- The conditions under which they may be cashed or enforced.
- The circumstances require the replacement of the guarantor.
Obtaining checks or promissory notes without stating their purpose in the agreement may lead courts to consider them unenforceable. Therefore, guarantees should be transparent, lawful, and fully documented.
Lawful Methods for Lease Termination by Either Party
Contrary to common belief, unilateral termination of a lease without legal grounds is generally not permitted. Termination is allowed only in specific circumstances recognized by the Landlord and Tenant Relations Law and should also be reflected in the agreement. Common legal grounds include:
- Non-payment of rent for more than three months.
- Unlawful use of the property.
- Intentional destruction or damage.
- Failure to comply with contractual obligations, such as failure to provide the deposit or failure to perform agreed-upon duties.
It has been emphasized that lease agreements should clearly state termination conditions. Otherwise, parties may need to proceed through the courts. The parties may also include a “mutual termination” clause that allows the lease to end at any time by mutual consent. Careful drafting of this clause helps prevent severe conflicts.
Benefits of Obtaining a Tracking Code and Registering the Lease
One of the most significant changes implemented in 1403 is the requirement of a tracking code for the full legal recognition of lease agreements. This code confirms that the agreement has been registered in the national real estate transaction system. Key benefits include:
- Verifying the contract date and terms.
- Facilitating legal follow-up through official authorities.
- Preventing the same property from being leased to multiple persons at the same time.
- Supporting administrative processes, including certain municipal and tax clearances.
To obtain a tracking code, the lease must typically be prepared through a licensed real estate agency. The agreement’s information is then recorded in the system, and a unique tracking code is issued to the parties. Under the 1403 amendment, lease agreements without a tracking code may not be fully enforceable before official authorities, and either party’s rights may be inadequately protected.
Frequently Asked Questions About Proper Lease Drafting
A properly drafted lease agreement helps prevent future disputes and legal complications. A clear contract defines the rights and obligations of both landlord and tenant. It significantly reduces the risk of misunderstandings and litigation.
Any person with legal capacity may enter into a lease agreement. The landlord must be the registered owner of the property or a lawful representative of the registered owner. The tenant must have legal capacity to assume contractual obligations.
A standard lease agreement should include the parties’ details, property specifications, the lease term, rent and deposit amounts, payment method and schedule, the obligations of each party, termination conditions, and the tracking code where applicable.
The lease term must be clearly defined with specific start and end dates. Rent provisions should precisely state the monthly rent, deposit amount, payment method, due dates, and any agreed late payment penalties, in accordance with applicable legal requirements.
A landlord may secure obligations through a guarantee check, promissory note, or other valid guarantees, and by registering the agreement to obtain a tracking code. A tenant benefits from a properly documented and registered agreement that helps protect against unlawful eviction and supports enforcement of the landlord’s repair obligations.
A lease may be terminated only under specific legal grounds, such as non payment of rent, unauthorized use of the property, intentional damage, or failure to perform essential contractual obligations. Termination should be pursued through the competent legal authorities. Verbal notice alone is not sufficient.
The agreement should specify the deadline for vacating, the procedure for key handover, and any contractual penalties for delay. Key delivery to the landlord or the landlord’s lawful representative should be clearly stated as the condition for concluding the lease relationship.
A formal lease agreement is executed and registered at a notary public office and generally provides stronger enforceability. An informal lease agreement is typically drafted through a licensed real estate agency and should be registered to obtain a tracking code. In the event of a dispute, informal leases usually require judicial review.
Major and structural repairs are generally the landlord’s responsibility. In contrast, minor routine repairs are usually the tenant’s responsibility, unless the agreement states otherwise. The contract should define these responsibilities in detail to avoid disputes.
To register a lease formally, the parties typically provide proof of ownership or an official power of attorney, identification documents, the agreed lease terms, and payment of notary fees. The notary reviews the documents, prepares the official deed, and the parties sign it.
The agreement should specify whether renewal is automatic or requires a new written agreement. It should define the method or percentage for rent adjustment upon renewal. Any applicable legal limits on rent increases should also be considered.
Common guarantees include a guarantee check, a promissory note, a qualified guarantor, or a cash deposit. The agreement must clearly state the purpose of the guarantee and the conditions under which it may be enforced, otherwise it may be challenged in legal proceedings.
A tracking code confirms registration of the lease in the national real estate transaction system. It helps verify the contract date and terms, supports legal enforcement, reduces the risk of double leasing, and facilitates certain administrative processes.
Disputes can be reduced by verifying identity and ownership documents, drafting clear and comprehensive clauses, properly registering the lease, defining repair responsibilities, specifying termination and vacating procedures, and documenting guarantees in a legally enforceable manner.
Before signing, the parties should review identification and ownership documents, clearly define the term, rent, deposit, obligations, termination and vacating clauses, and register the agreement to obtain a tracking code. Seeking legal review is also recommended for higher value or complex leases. Why is it important to draft a lease agreement properly?
Who is legally permitted to enter into or draft a lease agreement?
What are the essential elements of a standard lease agreement?
How should the lease term and rent be determined?
What legal safeguards can be included for the landlord and the tenant?
Under what circumstances can a lease agreement be terminated?
What should be included in the vacating and key handover clause?
What is the difference between a formal and an informal lease agreement?
Who is responsible for repairs and maintenance in a lease agreement?
How can a lease agreement be registered at a notary public office?
What should be addressed regarding rent increases and lease renewal?
How can a landlord obtain a valid guarantee from a tenant?
What are the benefits of obtaining a tracking code and registering the lease?
How can lease related disputes be prevented?
What practical recommendations help ensure a legally sound lease agreement?
