When you rent out a property, you will need to decide if you wish to offer your tenants a lease or a rental agreement. Although these terms are often used interchangeably, they are not the same.
A lease has a set term, such as six months or a year, during which the tenant agrees to rent the property. During that time (also known as the duration of the lease), the tenant and the landlord must adhere to the agreement. For example, tenants agree to make monthly rent payments and follow any code of conduct or other stipulations in the lease.
Neither party can change any terms of the agreement until the lease expires, unless both parties agree to the change. A tenant can’t vacate the property without breaking their lease, in which case they can be held liable for the rest of the rent due under the lease, or can be required to find someone else to take over the lease.
A lease agreement or a rental agreement is a vital legal document that should be completed prior to a landlord renting property to a tenant. While both agreements are similar in nature, they are not the same and it is important to understand the differences.
A lease agreement is a contract between a landlord and a tenant that covers the renting of property for long periods of time, usually a period of 12 months or more. 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.
1. Rental Agreements
A rental agreement differs from a lease agreement in that it is not a long-term contract and usually occurs on a month-to-month basis. This month-to-month lease agreement expires and then renews each month upon agreement of the parties involved.
All the same stipulations are included in a month-to-month lease as are in a standard lease; however, either the tenant or the landlord can alter the terms of the agreement at the end of each month. The landlord has the option to raise the rent or request that the tenant quit the premises without violating the rental agreement. A landlord must give a proper 30-day notice to quit, however, prior to requesting the tenant leaves the property.
2. Lease Agreements
The length of the lease and the amount of monthly rent are documented and cannot be changed. This ensures that the landlord cannot arbitrarily just raise the rent and the tenant cannot just leave the property whenever they want without repercussion.
The lease agreement is effective for the specific time stated in the agreement and is then considered ended. If the tenants wish to remain in the property, both parties must enter into a new lease agreement.
A landlord is not obligated to renew the terms of the old lease and is free to change terms and rental amounts if desired. For this reason, some tenants prefer to sign a longer-term lease if the monthly rent is very reasonable and in an area where rents are likely to increase during the term of the lease.