Both a rental agreement and a lease provide a documented contract between the landlord and the renter, which outlines the expectations and responsibilities of each party.
However, different circumstances warrant different documentation. Here are a couple of differences that you should know between a lease and a rental agreement.
Lease
When a landlord and a renter enter into a lease agreement, there is a set amount of time (or lease duration) that the lease covers. This length of time is usually six months to one year.
The lease cannot be changed or amended, unless both parties agree to the change. This means that, if the lease is for one year, the landlord can’t increase the rent until the lease has expired.
Also, the renter cannot vacate the property and stop making rental payments in the middle of the lease duration, without paying penalties as outlined in the lease agreement.
Some landlords prefer a long-term lease because their rental property is still under mortgage and the lease agreement allows more financial stability and planning. In fact, some landlords choose to offer reduced move-in deposits if the tenant is will to sign a long-term lease.
Most tenants are familiar with long-term lease rules and have no problem signing one to stay in the property for an extended period of time.
From a property management perspective, it is always better to offer long-term lease terms so as to mitigate the cost of turning over a property for a new tenant.
Rental Agreement
Rental agreements offer much more flexibility for the renter and are perfect for renters who only need a place for a month, or so. For instance, if they are having a home built or are in town for business.
A rental agreement is basically a lease with terms of no more than 30 days. The renter is able to move out at any time, as long as they provide the required notice and they pay rent through the time that they are in the property.
Additionally, the landlord has more flexibility to make changes to the terms of the rental i.e., the amount of rent that is paid or the length of time that the property is available for rent.
If you are a landlord and you plan on selling your rental property, you may want to offer month-to-month rental agreements to your tenants so that they are required to vacate once the sale has gone through.
If you are a renter and you are a student or professional in town for business, you may want to only look for properties that offer month-to-month rental agreements that maintain the flexibility that you need
It is important to know the differences between these two contracts and enter into the one that best fits your specific circumstances.