March 06, 2018
Is There a Difference Between Renting and Leasing a Property?
Often the phrases “rental agreement” and “leasing agreement” are seen as interchangeable by renters and landlords alike – but is there a big difference between renting and leasing a rental property? The short answer is Yes! Read on to discover the difference between renting and leasing…
Leasing a Property
Leasing a property is the common scenario for many people. They find the apartment or rental condo of their dreams and they sign a lease for a year. This lease gives the tenant the legal right to live in the unit for that 12-month fixed period. Sometimes the leasing period might range from six months to 24 months, but the most common lease is a yearly lease.
A lease also contains a set of agreed-upon terms and conditions for the tenant to live in the unit. These include when the rent is due (and what happens if the rent is late), whether or not pets are permitted, any no-smoking clause and duration of the lease. It clearly states the name of the landlord and the name of the tenant(s), and identifies the exact civic address for the property. Both parties sign and date the lease, and it becomes binding.
A lease will also outline renewal terms, and also gives provisions for what happens if the tenant needs to break the lease before its ending date. A landlord is not obligated to keep the conditions of the original lease when the lease renews. This is why sometimes a tenant will sign a 24-month lease to lock in a monthly rent amount.
The purpose of the lease is to protect both parties. The tenant is assured the right to live in the apartment, as long as the terms and conditions of the lease are being met – for example, the rent is being paid and the tenant does not vacate the rental unit halfway through the lease. Likewise, the landlord does not have the right to move the tenant along because his 20-something son or daughter has moved back after college and needs a place to live.
For a landlord, a lease can be preferable when they want to lock in a renter for a set period of time. It offers a guarantee of income for a set period of time. Tenants are familiar with leases and usually have no problems with a one-year commitment.
Renting a Property
A rental agreement on the other hand is designed for people who do not want to be tied to a set lease duration. It’s a month-to-month contract that expires and renews each month upon the agreement of both parties. All the same provisions and requirements are included in the month-to-month rental agreement as a leasing agreement. (For example, the rent amount, when rent is due, whether or not pets are allowed, etc.)
However, at the end of the month, the landlord has the right to raise the rent (within applicable rent control laws), and the tenant has the right to vacate the premises. In most states, both parties must give the other party 30 days’ notice of any change.
Why would a tenant ever want a monthly rental agreement rather than a lease? There are some folks who don’t fit into the “I want to live in a place for a year” mold. These include a student who only wants to rent for a semester, or people who may be in the area only for a 6-month work contract, or someone who is new to town and is looking to buy a house.
And, conversely, why would a landlord want to rent rather than lease? This scenario can be good for landlords who have properties near colleges or universities, of if the property may not be right to a long-term renter – for example a partially furnished unit. Sometimes a landlord may prefer renting a property to leasing if an area is in transition or regentrification, as they can renegotiate the rent.
If you are a landlord or own a property management firm, Property Vista can help you manage your lease and rental agreements more effectively. To learn how our cloud-based software solutions can help you manage your property more effectively, visit PropertyVista.com and click “Get Started.”