Understanding Parking Lot Rental Contracts: A Comprehensive Guide

What Is a Parking Lot Rental Contract?

Understanding Parking Lot Rental Contracts: A Comprehensive Guide
Basic Definition: A parking lot rental contract is an agreement between a landowner and a party who will rent the subject lot for parking. Such an agreement will generally contain a detailed description of the property, a definition of the limited end use of the subject lot (ie. "parking"), the method of provision of the rental fee, the duration of the term, and any other considerations/covenants/terms that may exist between the parties following the execution of the contract.
Purpose: Generally, a parking lot rental contract is used to provide an income source to the landowner, transfer the associated risk of the parking lot to the renter, provide for upkeep of the parking lot, or to provide a right to the renter to have the subject property managed in a certain fashion . This is especially true if the parking lot is to be run or part of a business for the renter/successor tenant.
Use: The parking lot rental contract is essentially a short term lease entry between the landowner and the renter (we will use "business" or "restaurant" as the hypothetical renter). In order to execute a legally binding contract, the offer and acceptance must exist, consideration should always be provided from the rentor, a legal purpose must exist (ie. the lot cannot be rented for illegal purposes), sufficient description of the rights being granted to the renter must be provided, and a termination clause must be provided.

The Elements of a Parking Lot Rental Agreement

Every contract, regardless of how simple it may be, is a formalized and legally enforceable agreement between two or more parties. A parking lot rental agreement is no different. In addition to establishing the basic legal obligations between a homeowner or other landowner and the person(s) or business seeking to rent a parking spot, parking lot rental agreements are often used by owners of apartment complexes to provide accessible, convenient parking for sensitive, vulnerable tenants – virtually always for a cost that is significantly lower than what would be charged by an on-street parking enforcement entity.
The following list outlines the key components of any formal parking lot rental agreement:
Parties to the Contract – With rare exceptions, parking lot rental contracts will include language that identifies each party to the agreement by name. Because parking lot rental agreements are typically offered by landowners to one or more lessees (tenants), this terminology will apply to the landowner(s) (the parties providing the spaces) and the renter(s) (the parties who have paid for the spots). In the case of condo owners seeking rental spaces for tenants, the owner of a condo development or unit owners seeking to rent their spaces, language will typically be included that the agreement applies not only to the owner but any and all individuals with an ownership interest in the project. Contract language is then generally added to the materials which clarifies the current and future legal relationship between the subscribing parties.
Rental Rate / Terms – Parking lot rental contracts will typically indicate the dollar amount of rent owed to the property owner(s) by the tenant(s), as well as any provisions that dictate increments by which this rent might increase, additional payments or fees that might be assessed, and any incentives that may be offered by the owner(s) to the tenant(s) to pay rent on time. Most common are discount penalties (lower initial rent sets up expectations that the tenant must meet each month and reduces the likelihood of future disputes or litigation) and annual increases (decreasing the lower rate each year gradually reduces the rent rate to a fair market value as the property owner is forced to accept less rent than they might have charged for the spaces when securing the contract or agree to lower rent in exchange for an extended-term contract). Current and future amenities, restrictions and limits on landlord liabilities are also common components of parking lot rental agreements.
Payment Details – In addition to outlining any required payment/term expectations set out in the section above, most parking lot rental agreements also include details regarding acceptable payment methods (cash, check, money transfer, ACH transfer) and timelines for submission to the landlord (first of the month, 15th of the month, etc.).
Liability Intent / Waivers – While owners of parking lots are typically afforded significant protections from accidents that befall tenants and patrons on their property, an attorney can clearly explain these rights, responsibilities and limitations and help individual owners draft a detailed, precise rental lot agreement.

The Advantages of Renting a Parking Lot Space

For tenants, renting parking space offers a solution that might not be available nearby where they regularly travel. Major cities may be congested, and parking costly and limited in availability, which means that a drive of some distance may be necessary to find a fair price or available area for a vehicle. Instead, parking lot rental contracts can offer reasonable prices and travel distance to the location where a tenant needs it most. For instance, renting a parking space closer to the workplace means not having to take a taxi, share-a-ride service, or public transportation to get there. For landlords, renting a space can provide more money than attempting to lease the property for another purpose. In some cases, this can be long term, while other times it can be a short-term lease for parking for a special event or business run. While the amount gained by leasing a parking lot space might not be enough to make much difference in overall income, it adds more money overall, which can be useful to the property owner.

Common Parking Lot Rental Problems & Solutions

While a parking rental lease may seem straightforward, there are some common issues that come up that need to be handled appropriately to avoid or limit liability. First, when a tenant is not paying rent, you want to be careful to follow your lease when evicting them to avoid a counterclaim for an unlawful eviction. You also want to exercise caution with regard to towed vehicles – don’t prepare to tow a vehicle before you’ve reviewed the lease agreement governed by the state or municipality that defines the rules for towing vehicles from the property. If you have a disputed claim with a tenant, you don’t want it getting ugly and end up spending more on a lawsuit over the value of a car than the rent owed. Make sure your lease protects you from this by stating the individuals or family members whose cars are subject to the rental contract and any non-family members or guests associated with the tenant are not entitled to park in the spaces leased under the agreement. Also, you want to make sure that any additional services billed to the tenant are clearly defined and that the lease defers to legal and regulatory requirements. Even if you are managing the rental space as a convenience to the tenant, you don’t want to be liable for a personal injury or property damage resulting from a failure to safeguard your property from foreseeable harm. Make sure that services you provide don’t exceed the terms of your lease, unless you amend it accordingly.

Things Landlords and Tenants Must Consider

Hiring a lawyer to draft a parking lot rental contract is in the best interest of both parties. While an oral agreement might seem more convenient, it offers no remedy for a broken contract. A written contract settles any potential misunderstandings as to what is agreed upon.
Most importantly, it provides proof of the terms of the agreement if the parties end up in court.
An attorney drafted contract clearly sets out the responsibilities of the landlord and tenant. The contract should address such issues as whether the landlord can insist on leases with one year or longer terms, when and how rental fees are collected, and use of the property once the rental period has ended. In general, a comprehensive contract includes but is not limited to:
The best business practice is to make sure that the parking lot rental contract clearly sets out the responsibilities of the parties involved. When an issue does arise, the preferable resolution is a negotiated solution between the landlord and tenant. However, if one or both of the parties have failed to comply with the terms of the contract , then a court hearing may be needed to resolve how the contract will be enforced.
Neither party wants to spend a significant amount of their budget on expensive court costs and trial preparation, which is why it is recommended that both parties seek the services of an experienced attorney. However, in a situation where the parties have been unable to resolve the matter between themselves, a lawsuit may be the only other option.
In any situation where a landlord finds themselves having to negotiate with a tenant over problems with a contract, the value of the business contract greatly depends on how clearly it is stated. The same is also true for the tenant who may have to appear in court to prove their position. The Landlord-Tenant Act covers parking lots in regard to liabilities. Some parking lot landlords believe that they are not responsible for the loss of property or damage while parked on their property.
However, Washington civil courts have consistently held that a landlord of a commercial parking lot can be liable in full or in part for the loss of materials stored on the property. While a court cannot eliminate a landlord’s duty entirely, Washington courts do allow for the parties to contractually agree to limit the landlord’s liability.

The Process of Drafting a Parking Lot Rental Contract

When it comes to creating a rentals business, parking is often the last detail a property owner thinks about. But when parking lot space is at a premium, properties can make a small fortune by opening a parking lot to the public. And while some parking lots operate without a formal contract between the property owner and the tenant, a written contract is always preferable for both parties. As with any lease or tenancy, parking lot rental contracts should include clear terms of agreement, conditions, contingencies, dispute resolution and lease termination guidelines.
Who are the Parties?
First, even the most basic parking lot rental contracts should clearly identify both the parking lot owner or manager (lessor) and the person or entity renting the lot (lessee) in its opening clause. The contract should describe the premises and location being rented in very specific terms, including the property address and exact area to be rented. For example, the contract may want to be very specific: Are you renting two parking spots at the corner of the lot nearest to the street? Or, are you renting a designated area such as the entire lot or half of the lot (north/south/east/west)? Is lessee able to rent the space to others, are pets allowed, etc.? A parking lot rental contract doesn’t need to be complicated, but, like any lease agreement, it should clearly detail who is renting what and under what conditions.
Description of Terms and Conditions
This is where most parking lot rental contracts get hazy. There are a number of important details that a contract should include to make the agreement legal on both parties, and to prevent disputes. Any limitations on the use of the property (i.e., use of the space only for vehicle parking) should be clearly spelled out in the written contract. If the owner or manager has specific hours of availability, this information should also be placed in the written contract. Pricing details should be included: what is the rate for the parking space, what payment options do you offer, what is the late fee, is there a minimum rental period, etc.? A parking lot rental contract should also include conditions for breaking the lease, for both parties. There may also be restrictions regarding the type of vehicles permitted on the premises, and if so, these too should be spelled out in the contract. This is also helpful information for the manager to have, in case of a dispute with a general parking lot customer.
Breaks and Early Termination
A contract for parking lot rentals, just like any leasing agreement, should have clear details regarding the duration of the tenancy, and how either party can break the agreement. For example, are all contracts for a minimum of six months, or is the term of rental flexible? Does an individual have to secure a lease for a minimum of three months before renting the space? Do you allow sub-leasing? What protocols do you have in place for bad weather conditions? If a tenant needs to end the lease after only three months, will you accommodate? Or, if you see that a tenant is only using the space sporadically, even though they locked into a yearly contract, will you be willing to refund them the remainder of their rent? Again, as with most leasing agreements, even parking lot rental contacts should provide clear terms regarding the beginning and end of the tenancy, as well as how to best deal with early termination.
Dispute Resolution Guidelines
Disputes between parking lot owners and tenants can be costly and time-consuming. Both parties should consider inserting an arbitration clause into their written leases, which can help ease the burden of costly litigation if a tenancy dispute arises. Similar to dispute resolution guidelines for other leasing agreements, details can include the costs of the arbitration, the governing rules, the number of arbitrators, how the arbitrators are selected, and when arbitration will begin. The cost of arbitration is generally split down the middle for each party, but this is negotiable. Even simple arbitration guidelines can help prevent costly litigation regarding parking lot rental contracts.

Parking Lot Rental Contract FAQs

The most common questions that we receive about parking lot rental contracts are as follows:
Q: Do I need a written contract for parking lot rental?
A: It is not a mandatory requirement, however it is highly recommended because the written contract is what memorializes how the parking lot will be operated, i.e., what are the rules, how much is the rent, and the payment terms. The rental contract also provides the legal tool to enforce the terms of the contract if an issue were to arise.
Q: What should I include in a parking lot rental contract?
A: Most importantly, tailor the terms of the license agreement to the parties and the specific agreement. Here are some items that are commonly found in a parking lot rental contract, but again , amending to fit the parties, and the specific agreement situation is important.

• purpose of rent (commuter, special event, etc.)
• permitted use (who can park)
• rental term
• parking fee
• terms of payment
• provisions for default and termination
• proof of insurance (commonly required);
• provision for surrender of the property and removal of the stored property;
• limitation of liability
• indemnification from third parties
• in New Jersey, owners of the parking lot should be aware that they may lose their right to file a trespass (NJSA 2C:18-3) against unauthorized persons who park on their property if they allow it to be used as a parking lot without a license or agreement (i.e., actual or implied permission).