Deciding between a lease and rental can be confusing.
You hear the terms all the time: lease a storefront, rent an apartment. And the signs adorn buildings: For Rent, Lease Available. These can lead to confusion, especially because both terms seem to have similar meanings. But there are differences between the two that are important to understand before signing any contract.
Rental Agreement
A property rental agreement is an agreement signed by the tenant and the landlord providing property use on a month-to-month basis. A tenant is the person or corporation using the space, either for residence or business, and the landlord is the person or corporation who owns the space. There is usually no set term of the rental agreement, meaning that the tenant is released from the agreement at the end of each month. The landlord can amend or change the agreement with written notice.
Leasing Agreement
A lease, or leasing agreement, is also signed by the tenant and the landlord for a set period of property use. The tenant is required to pay a set monthly rent for the entirety of the agreement, usually between six months and a year. Neither the landlord nor the tenant can change the agreement at any time during the leasing period.
Expiration of a Rental Agreement
When a rental agreement expires, at the end of every month, it is usually auto-renewed. This means that the agreement continues on until the tenant decides to move or the landlord asks the tenant to vacate the property.
Expiration of a Leasing Agreement
A lease cannot be broken until the end of the contracted period. Once the period ends, the lease is not auto-renewed and the tenant must give the landlord notice of his intent to remain in the premises. Sometimes when a lease ends, the tenant may stay in the property on a rental agreement, or month-to-month basis.
Uses
A lease is most commonly used when a landlord prefers a stable tenant who is locked in to a space for a certain amount of time. Many tenants are familiar with a lease and will not have a problem complying with its terms.
A rental agreement is usually used by landlords catering to students or young professionals or in other situations when landlords have difficulty attracting long-term tenants. Tenants in rental properties prefer the freedom that a month-to-month agreement offers.
