Wondering about the difference between lease and rent? Read our guide to clear up any confusion between the two real estate terms.
Updated August 27, 2024 | Written by Jana Freer
Reviewed by Susan Chai, Esq.
Chances are you are currently renting a room, a house, or an apartment since over 43 million households are in some form of rental situation.
Are you truly renting out your home, or are you leasing it?
If you’re puzzled by the distinction between a lease and a rental agreement, don’t worry—we’re here to clarify!
The critical difference between lease and rent is their duration.
Whereas a lease remains valid for the period specified in a formal agreement (typically one year), a rental agreement could cover a short-term period for month-to-month stays or vacation rentals.
For example, you and your long-term partner may sign a lease agreement that lasts one year.
However, you may opt for a month-to-month rental agreement when moving in with your partner for the first time because it is more flexible (if things don’t work out).
Renting refers to the short-term arrangement in which one party lives in or uses a piece of property owned by another party.
Rent refers to a regular payment made to a landlord by a tenant leasing property like a house or apartment.
When renting, the landlord has the right to change the rental agreement terms as they see fit. Additionally, a standard rental agreement is valid on a month-to-month basis.
A lease outlines an agreement between a lessor and lessee that dictates a rental period and other housing-related stipulations.
As a rule of thumb, a lease agreement covers an extended period known as the “term” and typically lasts one year.
It does not automatically extend past the end of the term, so parties to the contract will need to create a lease renewal to continue renting the property.
Landlords should know the difference between a lease renewal and a lease extension before sending this binding contract to a tenant.
Some agreements include a clause allowing the tenant to continue a month-to-month tenancy after the agreement ends.
These contracts can cover all sorts of property, such as:
These agreements are binding legal documents. Parties to the contract cannot modify terms without an amendment form.
The tenant and property owner must honor the original agreement minus any amendment.
For modifications, amending a lease agreement with a legally binding form is the best way to protect all parties — although both the lessor and lessee must agree upon the amendments for the changes to be valid.
Leasing a house offers tenants the sense of security of living in a home and the flexibility of not having to purchase a property.
As with any lease, the terms of the document determine how long you can rent the property, the agreed-upon monthly rent, and other miscellaneous conditions such as a required house or yard maintenance.
Unlike an apartment, landlords leasing a house may include an “option to buy” or “rent-to-own” clause.
Under a lease option to buy (and depending on the contract’s exact terms), rental payments are an investment toward a down payment on the property.
Rent-to-own agreements are attractive for many individuals or families with trouble securing a mortgage loan.
When deciding between leasing an apartment vs. renting, you must consider how long you will rent the unit.
Are you okay with living in that apartment building for at least a year?
If you aren’t and would rather have something more flexible, perhaps signing a month-to-month rental agreement or subletting the property to another tenant with a sublease agreement is better for you.
However, ensure you aren’t asking, “What is subletting?” before you sign anything.
For instance, a college student who plans to leave town each summer may be unable to fulfill a long-term agreement, and the alternative leasing options mentioned above would be ideal.
If you decide to rent an apartment, an apartment lease operates the same way as renting a house — albeit without the option to purchase the apartment unit or building.
If you plan on renting an apartment, you’ll almost certainly be required to sign a formal lease contract (likely for at least one year).
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Real Estate Editor
Jana Freer is a Real Estate Editor with Legal Templates, where she creates and edits legal form descriptions and articles to help landlords and tenants better understand real estate processes. She.
Use our Lease Agreement to rent out your residential property.
