Lease clauses › Governing law clause

Governing law clause

A governing law clause identifies which jurisdiction's substantive law will be used to interpret the lease. For residential real estate the answer is almost always the state where the property is located — landlord-tenant rules are mandatory local law, so the forum state's statutes control regardless of anything else the lease says.

Three related clauses

Governing law — which body of law applies to the contract.
Venue — which specific court or county will hear a dispute.
Jurisdiction — whether the parties submit to that court's authority.

Example wording — US residential

Governing law. This Agreement shall be governed by and construed in accordance with the laws of the State of [State], without regard to its conflict-of-laws rules. The parties consent to the exclusive jurisdiction and venue of the state courts located in [County], [State], for any dispute arising out of this Agreement.

Commercial leases can pick differently

Commercial leases — especially national chain tenants — sometimes pick Delaware or New York law to match the rest of the corporate contract stack. Courts usually honour that choice, except for issues that are mandatory under the property state's law (eviction procedure, lien priority, real-property recording).

India practice

Under Indian law a rental or leave-and-license agreement is governed by the Transfer of Property Act 1882 together with the rent-control or tenancy statute of the state where the property is located — Maharashtra Rent Control Act, Karnataka Rent Act, Tamil Nadu Regulation of Rights and Responsibilities of Landlords and Tenants Act 2017, etc. The clause customarily reads:

Governing law. This Agreement shall be governed by the laws of India. Courts at [City], [State] shall have exclusive jurisdiction over all disputes arising hereunder.

Common mistakes

Picking the landlord's home state when the property is elsewhere — unenforceable for residential.
Choosing arbitration for a residential eviction — void in California, New Jersey and several other states.
Omitting venue entirely and ending up in the wrong county small-claims court.

FAQs

What does a governing law clause do in a lease?

It identifies which state's (or country's) law will be applied to interpret and enforce the lease. For residential leases this is almost always the state where the property sits, because landlord-tenant law is mandatory local law and cannot be contracted around.

Can a residential lease pick a different state's law?

Generally no. Housing-code, security-deposit, eviction and habitability statutes are "mandatory" law — the forum state's rules apply regardless of what the lease says. A choice-of-law clause picking another state is usually void for residential tenancies.

What about a venue or jurisdiction clause?

A venue clause states which courthouse will hear disputes. Residential leases must be litigated in the county where the property is located in most states — a clause picking another county is unenforceable for evictions.