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What is the Difference between Leases and Rental Agreements?

As a landlord, you can choose to document your arrangement with renters using a lease or a rental agreement. You should know what each of these is and which is best for any given situation.

All enforceable contracts, including leases and rental agreements, have three requirements:

  • Offer: One party offers the other something in return for receiving something else. In the case of a rental arrangement, the landlord offers a resident a place to live in exchange for rent payments.

  • Acceptance: The person who’s offered something must accept the offer. Acceptance may be in the form of a written or oral agreement.

  • Consideration: Whatever each party gives up is called consideration. For example, the landlord agrees to transfer property rights to the resident for a period of time in exchange for regular rent payments from the resident.

Looking at leases

A lease is a contract that specifies the legal obligations between the landlord and the resident for a particular period of time — often one year — and prevents the landlord from raising the rent or modifying any of the other lease terms until the lease expires or a term of the lease allows for such changes.

During the term of the lease, the landlord may not evict the resident unless the resident fails to pay rent on time or violates one or more of its other provisions. At the end of the lease term, the landlord may end the tenancy, renew the lease on the same or different terms, or allow the resident to continue her tenancy under a month-to-month rental agreement.

Understanding how a rental agreement differs from a lease

A rental agreement sets up a contract between the landlord and the resident for a short period of time, usually one month. Such a month-to-month rental agreement is automatically renewed each month unless either the landlord or the resident gives the other proper notice — usually 30 days.

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