Rental Agreement vs Lease: Detailed Comparison


When renting an apartment or house, you’ll likely come across the terms ‘rental agreement’ and ‘lease.’ Both of these are contracts between you and your landlord, but each term has different implications.

So, what’s the difference between the two? And which one is better for you?

In this guide, we’ll compare rental agreement vs lease – including their definitions, similarities, and differences, so keep reading!

What Is a Rental Agreement?

A rental agreement is a contract between a tenant and landlord that outlines the terms of the tenancy. A rental agreement, unlike a long-term lease contract, is normally for a shorter period of time—usually 30 days. It ends and renews each month upon the parties’ approval.

A monthly agreement has the same obligations as a standard lease, with one exception: either the tenant or the landlord may modify the conditions of the agreement at the end of each month. The landlord has the choice to raise the rent or ask that the tenant leaves the renting property without breaching their rental lease agreement. However, the landlord must follow certain rules when evicting a tenant. Let’s look at the most important rental agreement benefits and drawbacks:

Rental Agreement Advantages

Here are some of the most notable rental agreement advantages:

  • Short-Term Flexibility

A monthly rental agreement may be perfect if you’re going to be in town for a limited amount of time, i.e. an internship, or if you’ve just arrived and need somewhere to call home while you look for other housing alternatives.

  • Freedom to Make Life Changes

Apart from being more flexible, a rental agreement also allows you to leave the property in case of some unanticipated life events that may force you to change your living address.

  • Chance to Renegotiate

Unlike lease deals, a rental agreement gives you room for negotiation. Although you will not be signing a new rental contract every month, this does give you the opportunity to renegotiate some terms of the contract, such as allowing you to have a pet.

Rental Agreement Disadvantages

However, these agreements have some disadvantages, too:

  • Less stability

You have the right to terminate your rental agreement after 30 days under the same rules as the landlord. Keep track of your contract and see if the landlord has a specific time frame in which he must inform you that you must vacate the property at the end of your house rental agreement.

  • Rent Increases

In many locations, the landlord may increase the rent every time the contract is renewed. If the neighborhood property values rise, your landlord may want you to pay more for rent. The rules regarding when and how much your rent will rise should be included in your rental agreement. Landlords may have to give you a notification within a certain period of time, too. After all, a sharp rise in rent might be all it takes for you to decide to leave.

DID YOU KNOW: If you’ll be moving in with your pet, make sure that the landlord includes their pet policy in your rental agreement. Depending on the situation, the landlord may need to conduct a pet screening and you may be required to provide a pet deposit or even to pay “pet rent”.

What Is a Lease?

A lease is a contract between a tenant and a landlord that outlines the tenancy terms and specifies the length of time a tenant is permitted to live on a property, which is typically one year.

Once the contract is signed, neither of these conditions can be altered. This ensures that the landlord cannot raise the rent arbitrarily and that the tenant cannot leave the property whenever they choose without consequences.

Both the landlord and the tenant sign a lease agreement that includes specific terms and conditions, such as how much rent will be paid, when it will end, whether pets are permitted, etc. In order to change these conditions, consent is required from both parties. You may hire a professional leasing firm to negotiate the agreeable terms based on your requirements.

Lease Advantages

Take a look at the most prominent advantages of a lease:

  • Greater Stability

The key advantage of a lease is its stability. You have the right to remain in your house throughout the term of the contract. It’s perfect for someone who knows they want to stay in a location for an extended amount of time.

  • No Rent Increases

One of the greatest benefits of a lease is that the landlord cannot raise the rent for the duration of the contract. You are bound by the monthly rent stated in your lease once you have signed it. For this reason, some tenants prefer to sign a longer-term lease if the monthly rent is cheap or the property is located in an area where rents are likely to rise over the duration of the contract.

  • Rent-Controlled Renewal

You may be able to renew your lease at the same rate (or with a small increase) at the end of the lease term in rent-controlled areas, making renting in expensive cities more affordable.

Lease Disadvantages

Make sure to consider these disadvantages, too:

  • Less Flexible

A lease doesn’t offer much flexibility. According to the lease definition, you’ve agreed to reside in a location for the duration of the time specified in the agreement. If you get a job somewhere else in the country and must relocate, a long-term agreement might become an obstacle.

  • Consequences of Breaking a Lease

Breaking a lease might have consequences, such as the loss of deposit or being responsible for the remainder of the rent. Find out what happens if you break the lease contract early on by carefully examining the terms of your lease.

Once you do that, you’ll have a clear idea of all the pros and cons of the lease which will help you decide if that’s the best contract type for you.

DID YOU KNOW: Your lease contract should clearly state the security deposit terms, which should include the deposit amount, the name and address of the institution where it’s held, the interest rate, as well as the reasons under which it could be taken by the landlord.

Rental Agreement vs Lease

Rental agreements and leases are both contracts between tenants and landlords that outline the terms of the tenancy. Although they may appear very similar on the surface, they do have some distinct differences.

Let’s take a look at the things they have in common first:

  • Both agreements are limited in duration.
  • Both of them require a security deposit, which the renter pays to the landlord to cover potential damages and which the landlord returns at the end of the term if there haven’t been any.
  • Lease and rental agreements specify what maintenance and utility costs will be covered by the owner, as well as those the renter will be responsible for.
  • They provide rules for usage, including pet policies and a landlord’s right of entry.

Now let’s look at the differences between lease agreement vs rental agreement:

Basis for Differences Lease Agreement Rental Agreement
Meaning  A lease entails entering into a contract with the owner to use an asset/property for a long period of time. The rental agreement sets out for how long the landlord will rent a house or business to a tenant.
Contract duration A leasing agreement is usually signed for a long time, hence the need of using a good tenant screening service to find suitable tenants. The rental agreement is usually signed for a short period of time.
Accounting standards Accounting standard 19 (AS-19) is the basis for leasing agreements. A rental agreement is not governed by any particular accounting standard.
Parties  Lessor and lessee. Landlord and tenant.
Maintenance  In a lease, the lessee is normally responsible for any repairs or maintenance that are needed on the property. In the case of a home rental agreement, the responsibility for maintaining the asset falls on the tenant.
Changes in agreement Once the contract is signed, it remains in effect for a set period of time. The landlord may alter the agreement at any time.
Offer at expiry  The lessee is offered to purchase the asset/property after the term has ended. There is no such offer made to the tenant by the landlord.


Although there are some similarities between them, it’s also important to take into account the difference between a lease and a rental agreement. The type of agreement you sign will define your obligations and rights while you’re under that contract.

DID YOU KNOW: When a lease expires, tenants are either considered holdovers or are transferred to month-to-month contracts unless they sign a new lease with a new expiration date. Although tenants are required to follow the rules set in the initial lease, in this situation, terms are subject to change monthly.

Lease or Rent: Which Is Better?

When it comes to securing a place to live, there are generally two options: lease or rent. But which is better for you?

Lease deals are usually longer than rental agreements, typically lasting anywhere from one to three years. This gives tenants more stability and predictability when it comes to long-term housing solutions. Rental agreements, on the other hand, can be renewed on a month-to-month basis, giving tenants more flexibility if they need to move.

Another key difference is that leases often come with additional fees and restrictions, such as penalties for breaking the lease early. Rentals, on the other hand, tend to be more straightforward and simple.

So which is better? It depends on your individual needs and situation. If you need more stability and don’t want to worry about moving any time soon, then a lease is probably the way to go. But if you need more flexibility or plan on staying in a location for a shorter period of time, then a residential rental agreement might be the better option.

DID YOU KNOW: Financially, living in one location for a long time might be beneficial. A year or two-year-long lease contract can significantly decrease your monthly expenses, unlike short-term rentals that charge premium rates

Wrap Up

So, is it better to sign a lease or rent month-to-month? The answer will depend on your individual circumstances. If you need a place to stay for a short period of time only, then a house rental agreement is the best option. But if you want stability, then a lease may be the way to go. Simply evaluate what is best for your needs.


Can a landlord break a lease?

Yes, a landlord can break a lease. However, they may be liable for damages if they do so. A lease is a legally binding contract between a landlord and a tenant. Once signed, both parties are obligated to uphold their end of the agreement.

What happens if my landlord does not renew my lease?

If your landlord does not renew your lease, you will have to move out of the rental unit. Depending on your contract (rental agreement vs lease), your landlord may give you a written notice to vacate the premises, or they may just tell you verbally that your lease will not be renewed.

What to do if the landlord violates the lease?

When your landlord breaches your lease, they may also be violating state and/or federal landlord-tenant legislation. If your landlord is breaking the law, you may report them to a government agency, specifically, the US Department of Housing and Urban Development (HUD).



As challenging as she looks, Kristina loves to question things. Her analytical skills give us a fresh look at markets, products and services and her experience as a real estate agent keeps our related topics up to par.

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