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Lease Agreement or Rental Agreement – Which Should You Choose?

Real estate properties cost a fortune. Hence, those who cannot afford to have one resort to renting a property instead. Entering into a rental or lease agreement is nonetheless serious undertaking; all terms included in the contract must be carefully and thoroughly weighed and discuss before formally sealing the deal.

You probably have heard of the rental agreement and lease agreement and thought they referred to the same thing. This article aims to shed light about the similarities and the differences between the two so you can decide better.

Rental Agreement and Lease Agreement Compared

There are two types of agreements in the leasing industry; rental agreements and lease agreements. True they have a lot of things in common but they vary in some significant aspects somehow.

Lease Agreement. A lease agreement contains a definite rent amount due for the entire duration of the contract and while this contract is effective, the rental property owner or the lessor cannot change or alter the terms in the contract especially the rent amount and occupancy terms. In other words, the lessor must wait until the expiration of the contract before he can include or propose any lease term alterations. And it will necessitate the preparation of an all-new contract like both parties are back to square one.

Major attributes of a lease agreement include the following:

Rental Agreement. Those who wish to have a more lenient and considerate lease term are advised to consider joining a rental agreement instead as this type of agreement covers a shorter term than lease agreements. Most rental agreements are renewable after a month; a deal advantageous for the rental property owner and the tenant.

In the rental agreement, terms pertaining to the fee, the rules, and the general terms can be reset or modified after a month as long as appropriate notice has been provided to the other party. In most cases, the landlord is obliged to give 30-day advance notice prior to the expiry of the old contract and the auto-renewal of a new contract.  This 30-day grace period can nonetheless differ depending on the location of the rented property.

Major attributes of a rental agreement include the following:

Components of a Rental or Lease Agreement

Both rental and lease agreements constitute a legally binding contract. They may vary in terms of terms, renewal policy, and modification of terms but basically, they contain the same list of components. Every rental or lease contract must have the following clauses:

  1. Name of the Rental Property Owner (Lessor)
  2. Name of the renter (Lessee)
  3. Rent Amount or Lease Amount
  4. Security Deposit and Advance Payment Terms including the amount, date, and terms of payment and return of security deposit
  5. Contract Start Date
  6. Contract Expiration Date
  7. Property Entry Terms/Limitations of the Landlord. This is to protect the tenant’s right to privacy. The landlord may legally own the establishment but once he puts his property for lease, he must also learn to respect the privacy of the occupants.

Other terms that also deemed necessary are the following:

  1. Pet Owning Policy. A lot of properties for rent do not allow pets inside their premises because of health and safety concerns. This clause is necessary especially for properties that share the same entrance and exit points.

Some People Prefer Lease Agreements. Here’s why…

Although rental agreements give the tenants and landlords freedom to alter and adjust the terms, a lot of people still prefer being in a lease agreement because of the following reasons:

Others Enter in a Rental Agreement. Here’s why…

Lease agreements may be beneficial but rental agreements are also advantageous in their unique ways:

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