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The Difference Between A Lease And A Rental Agreement

Whether you are a landlord looking for a return on your property, or a tenant looking for a residence, you will either be signing a lease or a rental agreement. Thus, it is essential to know the primary features of both agreement types and the critical differences between the two.

What Is A Lease Agreement?

Tenants are often required to sign a lease agreement before they can move into the property. This agreement states that the landlord is permitting the tenant to live in their property for a certain period of time – usually six months or a year.

Residential leases are contracts that specifically outline the contract terms, including rent details, agreement duration, and even rules about pets. Since a lease contract is what holds the entire deal together, it is important to draft it in language that is clear and concise while being thorough at the same time. Once the contract has been signed, neither party can alter it without the other party’s permission.

What is A Rental Agreement?

Although lease and rental agreements are quite similar – so much so that the two terms are often used interchangeably – there is a significant difference.

Where lease contracts are made for more extended periods, rental agreements allow tenancy for a shorter time – usually a month. The rental contract is renewed autom at the end of the month (a month, unless agreed otherwise). A rental agreement allows both landlord and tenant to alter the terms of the contract at the end of each month, as long as they follow the required notice procedures.

Benefits and Drawbacks of A Lease Agreement:


  • The long-term occupancy associated with leases makes them a viable option for tenants and landlords seeking stability.
  • Long-term agreements provide more predictable rental streams for landlords.


  • You cannot change the rental amount until the end of the agreement, thereby missing out on potential incremental income if the market goes up during the contract period.
  • If the property value grows within the contract period, a lease agreement might negatively affect the landlord’s profitability.

Benefits and Drawbacks of a Rental Agreement:


  • Greater flexibility regarding rental amounts – technically, you can revise the rent at the end of each month.
  • Ideal for landlords and tenants who cannot commit to longer terms associated with leases.


  • While the flexibility might benefit landlords, it is a potential drawback for tenants looking for stable rent amounts and longer occupancy periods.
  • Frequent tenant turnover might prove expensive for landlords as well, since it will require more significant marketing, screening, and maintenance costs.

To conclude, regardless of the type of agreement offered, it is essential for both parties to perform their due diligence to ensure that they are shaking hands with the right people and entering a beneficial contract.

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