Next to screening a tenant the lease can be one of the most important parts of of the rental process. In the lease you'll detail out what is expected from both parties and what the consequences are if one party does not abide by that agreement. This is the document that, should you have to evict your tenant, you may go back to to say that they made an agreement with you and gave you their word that they would follow that agreement. This is where you will detail out the amount of rent that they're expected to pay, the fees associated with late rent, how much of a deposit that they are putting down, if pets are allowed or not and, if they are, how much of a deposit is required for that pet.
Granted, you cannot predict every possible scenario, but a good lease will cover more common issues such as what happens when rent is not paid, if damage is done to the property, or if the landlord does not handle a maintenance issue in a reasonable time period.
Some landlords will avoid signing a lease with a tenant that is either month-to-month or someone that they know. Even if you are well acquainted with your tenant it is best to protect both parties with a lease. This way if there is a dispute over something, even in the most civil of fashions, you may both go back to the text that you agreed to in the beginning.
Check out BiggerPocket's article on some of the most overlooked lease issues here