Lease vs. Rental Agreement – Which One to Choose?
There is a difference between lease and rent. Both lease agreements and rental agreements are vitally important legal documents. They are to set out terms between a tenant and landlord before entering an agreement, and they should be totally understood before you enter this agreement. Both lease and rental agreements are pretty similar in terms of what they set out, they do have some differences. So what are the differences between a lease and rental agreements? Which one is right for you?
Both lease agreements and rental agreements are vitally important legal documents. They are to set out terms between a tenant and landlord before entering an agreement, and they should be totally understood before you enter this agreement. Both lease and rental agreements are pretty similar in terms of what they set out, they do have some differences. So what are the differences between a lease and rental agreements? Which one is right for you?
Put simply, a lease agreement usually covers 12 months. It can also be longer, but this is down to the individual agreement. You should be aware of the length of time before you enter into an agreement. A commercial property manager will usually outline 12 months as a starting point, but it doesn’t have to be this.
In this article, we’re looking at the Lease vs Rental Agreement pros and cons. What are the advantages of both and which will be suitable for your scenario? Let’s understand the difference between lease and rent.
One of the key differences between lease and rent is usually the length of time the agreement is entered into. A lease is usually set in stone for 12 months and can only be changed if both parties agree. This means that the rent amount is set and offers some protection for both parties. It means a landlord can’t just change the terms. It also makes it harder for a tenant to just move out when they want to.
A lease is a contract, and of course, it means that you are liable to stick to the terms. Often, at the end of the year, you can extend it, and this is the opportunity to change terms. This usually happens a couple of months before its expiry. Any increases in price or changes of terms can be negotiated before renewal is signed.
These types of agreements are possible for both commercial properties and homes.
Advantages of the Lease Agreement
A lease agreement has the advantage of long-term stability. For the landlord, it means you know your property is going to be filled for the period of the lease and guarantees income. For the tenant, it means that terms can’t be changed on a whim. For instance, your landlord can’t say “next month the rent is going up”.
A rental agreement is similar. Differences between Lease and Rent are minimal but the length of time they are agreed over is usually the key difference. The rental agreement is usually month to month. There is a 30-day term and monthly, the tenant can be asked to pay more or to leave the premises. Likewise, the tenant can leave with a lot less noticeable.
Changes that are made monthly must be valid within the limits of the law. There are rent control laws in many locations preventing huge hikes monthly.
A rental agreement is usually written to renew after each 30 day period until one of the parties provides notice otherwise. It is best for shorter-term lets and though it doesn’t provide the same level of security as a lease, there are some key advantages.
Advantages of the Rental Agreement
For a landlord, the advantage is that you can change the terms more quickly if you need to. If demand goes up and rental prices increase in the area, you can increase your prices as soon as the next month. For a tenant, the flexibility of not being tied into a lease for 12 months can also be a benefit. Think of it this way, if you are offered a job and quickly need to relocate, there’s less to consider. If you are tied into a 12-month lease it can be very hard to get out of this. It can come with fines or you may even be forced to pay the rent for the remainder of the lease terms.
Which one to Choose?
The key difference between Lease and Rent is the length of time usually set out in the terms. One is not better than another. They both provide different options for different circumstances, the important thing is that you match up the situation you are in with the right type of agreement for you and your own needs.
If you value stability, you should go for a longer-term lease with fixed terms. This can be good for businesses or if you have kids in a local school, for instance. If you need flexibility, however, it might be best to look for a rental agreement as you are not tied in for as long. You can make decisions month to month on whether you plan to move out of the area. Think carefully about the lease vs rental agreement and which one suits your own situation.