Rental Agreements vs. Leases

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Many real estate investors have their work cut out for them especially in deciding whether to use a lease or rental agreement for their rental properties. Luckily, we understand the struggles that new investors have to endure and have some tips to make the transition easier.

Renting out your property may seem like an easy source of income, but it can be a legal minefield. In addition, you may have to pay tax on the income you earn. If there are disagreements between you and your tenants, it can quickly become a drain on your time and resources. The best way to avoid this is to take the right legal advice at the start. Solicitors can deal with all areas of landlord and tenant law and are skilled in settling disagreements. However, prevention is better than cure. Before you even look for a tenant, a solicitor can help you decide what the terms of the tenancy will be and can build these terms into a written ‘tenancy agreement’ tailored to your needs.

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In renting out property, it is better to hire the services of a solicitor to help in drafting an agreement in writing before the tenancy begins as prevention is better than cure. There are two main options of agreements; a lease or rental agreement depending on the liking of the property owner.

1.Lease Agreement

  • 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, residents 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 cannot 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.

  • Leases are suitable for landlords who want to “lock in” a tenant for a set period. If you have a mortgage payment to meet, for instance, knowing you will have a tenant for the next year can help you budget your expenses. Most tenants are familiar with long-term leases and will not have a problem committing.

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  • Terms of the lease cannot change unless agreed upon by both landlord and tenant; during the duration of the lease, (i.e. you cannot raise rent until the lease expires).

  • Tenants are required to pay monthly rent and abide by the code of conduct outlined in the lease during the entire duration of the lease.

  • A lease renews upon expiration, unless specified otherwise in the terms or the tenant provides 30-60 days notices, prior to the expiry of the lease that they do not wish to renew.


  • Leases are the most common for both residential and commercial property and preferred by landlords who would like to lock in a certain amount of money for a specified amount of time.

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2.Rental Agreement

  • Rental agreements are month to month, with no set period of residence. At the end of each 30-day period, both you and your tenant are free to change the rental agreement (subject to any rent control laws).

  • These changes may include raising the rent, changing the terms of the initial agreement, or asking the tenant to vacate the property. However, in most states, both landlord and tenant are required to give 30 days’ notice before any changes can be made. If your state does not require notice, you can change any part of the rental agreement at your discretion.

  • A rental agreement typically renews automatically after each 30-day period has elapsed. There is no need to give notice about this automatic renewal, as long as neither you nor your tenant has stated that the tenant will vacate the premises.

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  • Rental Agreements can sometimes give landlords an edge over those offering leases since they are more flexible. They are popular in areas like New York apartment complexes or a bustling business districts.

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It is now clear that a lease locks the tenant and owner for 6-12 months while a rental agreement renews monthly. The question is which the best option for a property owner? Well, the best choice will depend on the needs of the proprietor and the rental numbers in the area.

Which is better? Many landlords prefer month-to-month agreements, particularly in tight rental markets where new tenants can be easily found, and rents are trending upwards. The flip side is that month-to-month tenancies almost guarantee more tenant turnover and more work to keep rental properties full.

Landlords often prefer leases in areas where there is a high vacancy rate or where it is difficult to find tenants for certain seasons of the year — for example, in college towns that are often deserted in summer.

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