What Must Be in a North Carolina Residential Lease

A residential lease in North Carolina is governed by the Residential Rental Agreements Act, a set of background rules that apply to every rental of a home in the state whether or not the parties ever sign a document. Those rules are covered in more detail in North Carolina landlord-tenant law. This article explains what the law actually requires a lease to do, which terms the parties are free to set themselves, and which lease clauses the state treats as void no matter what the paper says.

Does North Carolina require a written lease?

North Carolina does not require a residential lease to be written down. An oral agreement to rent a home is enforceable, and the Residential Rental Agreements Act applies to it the same way it applies to a signed lease. Under N.C. Gen. Stat. § 42-38, the Article “determines the rights, obligations, and remedies under a rental agreement for a dwelling unit within this State”, it does not condition those rights on a writing.

The definitions in N.C. Gen. Stat. § 42-40 are broad. “Premises” includes mobile homes and mobile home spaces, and “landlord” includes any owner, rental management company, or agent with authority to perform a landlord’s duties. So a lease signed with a property manager binds the owner behind that manager.

A written lease still matters in practice. It fixes the rent, the length of the term, and each side’s expectations, and several fees a landlord may want to charge, late fees, complaint-filing fees, and court-appearance fees, are only available “pursuant to a written lease.” An oral tenancy with no fixed end date is treated as a month-to-month tenancy, which either side can end with proper notice.

The basic terms a lease should identify

North Carolina leaves the core commercial terms to the parties. A residential lease typically identifies the following:

• The full legal names of the landlord (or the managing agent) and every adult tenant
• The address of the specific dwelling unit being rented
• The rent amount, the due date, and where and how rent is paid
• The length of the term, a fixed period such as one year, or a periodic tenancy such as month to month
• Any deposit and the conditions for its return
• Rules on occupancy, pets, subletting, and who is responsible for utilities

None of these are dictated by statute; the parties negotiate them. What the state controls is the ceiling on some of these terms and the duties that ride along with the tenancy regardless of what the lease says. Those are covered in the sections below. When a lease and the statute conflict, the statute governs and the conflicting clause drops out.

Security deposit limits the lease must follow

A lease can require a security deposit, but North Carolina’s Tenant Security Deposit Act caps the amount and controls how the money is handled. Under N.C. Gen. Stat. § 42-51, the deposit cannot exceed two weeks’ rent for a week-to-week tenancy, one and one-half months’ rent for a month-to-month tenancy, and two months’ rent for any longer term. A lease clause demanding three months’ rent as a deposit is unenforceable to the extent it exceeds the cap.

The same section lists the only purposes a deposit may be applied to, unpaid rent, damage beyond normal wear and tear, the cost of re-renting after a tenant’s breach, court costs, and a handful of others. A landlord cannot keep the deposit for ordinary wear and tear.

Where the money sits is also regulated. N.C. Gen. Stat. § 42-50 requires the deposit to be held in a trust account at a licensed, federally insured bank in North Carolina, or secured by a bond. Within 30 days after the lease term begins, the landlord must tell the tenant the name and address of the bank holding the deposit, or the name of the bonding company.

A tenant weighing a deposit dispute at the end of a tenancy will also want to understand the habitability rules described below, and how ending a term early affects the deposit, the ground covered in breaking a lease in North Carolina.

Late fees and other charges North Carolina allows

A lease can set a late fee, but only within the limits of N.C. Gen. Stat. § 42-46. A late fee is chargeable only if the rent is five calendar days or more late, counting from the day after rent was due. For rent paid monthly, the fee cannot exceed $15 or 5% of the monthly rent, whichever is greater. For rent paid weekly, the cap is $4 or 5% of the weekly rent, whichever is greater. A late fee can be charged only once for each late payment.

The same statute governs the administrative fees a landlord may add when a tenant defaults and the landlord goes to court. Pursuant to a written lease, a landlord may charge a complaint-filing fee of $15 or 5% of the monthly rent, a court-appearance fee equal to 10% of the monthly rent, or a second-trial fee of up to 12% of the monthly rent, but only one of the three per case, and only if the landlord actually filed and prevailed. Attorneys’ fees, when a written lease allows them, are capped at 15% of the amount owed. These charges attach to the summary ejectment process explained in the North Carolina eviction process.

Under Section 42-46, any lease provision that charges an unauthorized eviction-related fee is “against the public policy of this State and therefore void and unenforceable.” A lease cannot invent its own filing fee or processing charge for taking a tenant to court.

Repair duties the lease cannot waive

The most important thing a North Carolina lease cannot do is shift the landlord’s core repair duties onto the tenant. N.C. Gen. Stat. § 42-42 requires the landlord to comply with building and housing codes, make repairs to keep the premises fit and habitable, keep common areas safe, and maintain electrical, plumbing, heating, and other supplied systems in good working order.

The statute is specific about several items. The landlord must provide operable smoke alarms and carbon monoxide alarms and repair them within 15 days of written notice. Certain conditions are treated as imminently dangerous and must be fixed within a reasonable time, including unsafe wiring, lack of potable water, an inoperable toilet, and lack of heating able to reach 65 degrees Fahrenheit when it is 20 degrees outside, from November 1 through March 31.

This duty is the statutory side of the implied warranty of habitability. What the warranty covers, and what a tenant’s options are when repairs are ignored, is explained in the implied warranty of habitability in North Carolina.

Required disclosures and unenforceable clauses

North Carolina imposes few affirmative disclosure requirements in the lease itself, but one federal rule applies to most older housing. For any dwelling built before 1978, the federal Residential Lead-Based Paint Hazard Reduction Act, 42 U.S.C. § 4852d, requires the landlord to give the tenant an EPA-approved lead-hazard pamphlet, disclose known lead-based paint, and include a lead warning statement in the lease. The implementing program is described in the EPA real estate disclosure guidance. Housing built in 1978 or later is exempt.

Beyond deposits, fees, and repairs, several kinds of lease language are void in North Carolina no matter how the lease is worded. A tenant cannot be required to waive the landlord’s habitability duties under N.C. Gen. Stat. § 42-42. A deposit clause above the statutory cap is unenforceable past the cap. An eviction-related fee not authorized by Section 42-46 is void as against public policy. And a lease that names the wrong party as landlord does not defeat the tenant’s rights, because Section 42-40 defines “landlord” to include the owner behind any agent.