The terms lease agreement and rental agreement are often used interchangeably, but it is important to know that these are not the same thing
You should be aware that your responsibilities and rights will differ depending on what type of agreement you enter into. Below, we are going to look at the key differences between these two types of agreements:
What is a rental agreement?
All Business explain how “rental agreements are usually month-to-month contracts, with no long-term requirements. At the end of each 30-day period, the landlord and tenant are both free to change the terms of the rental agreement.” The landlord can offer the space to someone else, or increase the rent. Likewise, the tenant can decide to move to another property. Rental agreements tend to renew automatically at the end of each month, upon agreement of the parties involved.
Benefits of a rental agreement
A rental agreement may be beneficial in some situations as it offers flexibility. The landlord can ask the tenant to vacate the property if they have a sudden need for the space, or can increase the rent when they want. Whereas rental agreements may be attractive to some tenants with short-term needs, such as students or travellers, as it provides the freedom to move around as often as they like.
However, it is important to remember that this is a less secure option when renting. As a tenant, this means that there is no guarantee that you’ll be able to stay in a property for as long as you wish. For landlords, there is no guarantee of receiving stable rent payments, as tenants may decide to move out at short notice, leaving the property vacant.
What is a lease agreement?
On the other hand, a lease agreement has a set term and gives tenants the right to stay in a rental property for a fixed period of time. This is usually 12 months but can be any length of time, from three months to 24+ months. During the duration of the lease, both the landlord and the tenant mutually agree to fixed terms and conditions, such as the amount of rent to be paid, the duration of the lease, and so on. Neither party can change these terms without written consent from the other. You can even opt to go through a professional leasing company, who will negotiate the most agreeable terms based on your needs and requirements.
According to Keystone, “landlords prefer to deal with tenants that are represented by an agent” and this makes lease agreements a more secure option when renting.
Benefits of a lease agreement
A lease agreement offers long-term security and is mutually beneficial to both the landlord and the tenant. The main benefit for landlords is that it provides the stability of guaranteed, long-term income. It also means that landlords can spend less resources on finding and preparing the property for new tenants.
For tenants, a lease agreement offers the security of knowing that they can live in a property for a set amount of time, at a fixed price. This also saves on the costs associated with moving, which includes things like: agency fees, deposits, and moving van rental costs.
The length and terms of the lease are documented and cannot be changed without the agreement of both parties. This ensures that the landlord cannot force a tenant to move out or arbitrarily increase the rent. Likewise, a tenant cannot just decide to leave the property, without repercussions.
Experts at Legal Nature state: “The lease agreement is very specific in detailing the responsibilities of both parties during the lease and it includes all the necessary information to ensure that both parties are protected.”
While there are some similarities between a rental agreement and a lease agreement, it is important to know that there are some key differences between the two. The type of agreement you enter into will determine the responsibilities and rights that you will possess while you’re held in that agreement.
A rental agreement is short-term and the terms can be changed by either party, usually at the end of a 30-day period. Whereas a rental lease is a long-term agreement, with agreed terms and conditions that cannot be changed until the end of the lease, unless there is written agreement from both parties. This offers better protection and security for both landlords and tenants and is considered the best option in most situations.