Lease vs. Rental Agreement: Which to Choose?

Written on November 17, 2014 by , updated on December 6, 2015

lease-vs-agreementIf you’ve been a landlord for more than a year, you’ve probably noticed that not all renters desire the same type of arrangement.

Some renters may just be in-between the buying/selling process, awaiting a job relocation, or even remodeling.

Although most renters are used to 12-month leases, landlords may want to consider other options depending on the needs of the unit, timing, and audience.

So, your situation may behoove you to know the difference between a lease and a rental agreement.

Why Would I Choose a Rental Agreement?

A rental agreement, also known as a periodic rental agreement, is generally a month-to-month contract; however, some agreements can be as short as a few days or weeks. Once the agreement expires, one of the following three things can happen:

  1. The agreement is automatically renewed and payment is due.
  2. The landlord may request adjustments to the agreement like increase/decrease the rental price or other policy changes.
  3. The tenant is required to vacate the unit.

In most cases, a notice to vacate is still required when either party would like to end the agreement. The notice period is usually defined by your rental agreement or local laws in a month-to-month agreement.

Oral Agreements; Allowed, but Not Recommended

Oral rental agreements are also permissible; however, these are best avoided for liability reasons. Some states, such as California, suggest that written agreements be made if the rental is for more than nine months, pets are on the premise, or previous agreements have been made on utilities or landscaping.

When in doubt, get it in writing. However, even if your agreement is not in writing, tenants still have certain rights, such as an implied warranty of habitability and quiet enjoyment.

So, why would I want a rental agreement? For landlords, isn’t a long-term commitment more desirable?

For landlords, isn’t a long-term commitment more desirable?

The answer isn’t always so clear.

Rental agreements provide landlords more flexibility if, for example, you think you may need to occupy the unit or start renovations when a contractor is available.

A rental agreement also gives you the flexibility to charge different prices depending on the season. For example, some units in Florida rent for twice as much during the winter than summer.

A short-term agreement is also attractive to some renters who have short-term needs, such as students or those who have moved to your city for only a short-term work assignment, which allows you to charge a premium for this flexibility.

Why Would I Choose a Lease?

Lease ContractA lease gives the renter the right to live in a dwelling for a fixed period of time — usually 12 months. Both the landlord and renter are required to fulfill the terms of the lease for the stated period.

For example, many landlords include a clause forces the renter to be responsible for finding someone to take over the lease if he or she needs to move. Likewise, a landlord cannot raise the rental price unless it is stated within the lease.

Why are leases attractive?

The major advantage of a lease is the ability to rent the unit at a known price for a known period of time. Both renters and landlords feel comfortable with this security.

The primary comfort for the landlord is that renters can’t leave the unit at a moment’s notice without fulfilling the terms of the lease.

Still Unsure?

If you’re still trying to decide what to offer, consider this: leases are great for tenants looking to create a “home”; whereas, a rental agreement is for tenants looking for something more temporary.

Leases are great for tenants looking to create a “home”; whereas, a rental agreement is for tenants looking for something more temporary.

photo credit: Richard.Asia, [phil h] via cc
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20 CommentsLeave a Comment

  • Philip M. Rosenberg

    The difference in a lease or a rental agreement is not a matter of time, i. e. month to month vs. a year, but rather how and what is written in the body of the agreement. What states and or magistrates look at the title of an agreement vs. what is inside. I’m confused.

    • Chris Brasher

      Thanks Phillip. If I implied that the title (i.e., lease vs. rental agreement) is the final say then that was not the intention. A lease and rental agreement is absolutely determined by the meat of the contract which details length of the tenancy, repairs, restrictions, occupancy, etc. How you set up your rental contract may give you more flexibility for certain situations.

  • Gail blucker

    I have only done Month to Month rental agreements for many years. As you said the main advantage is the tenant can not just move out on a moment notice, well if the tenant chooses to move out in the middle of the night, with out even a moment notice they would do so!! Then getting the rent for the remainder of the term is almost impossible and a lot of times not worth the process. My tenants average 5 plus years on a month to month.

  • Hazel

    One factor this column ignored: In a Lease agreement, say it is for one year, if you happen to move in a really insane (sociopath, control freak, chronically disagreeable, etc) person, IN CALIFORNIA TENANTS RIGHTS ALWAYS TRUMP LANDLORD RIGHTS. SECTION 8 RENTERS ARE ACTUALLY COUNSELLED BY THE GOV’T AS TO HOW TO NOT BE KICKED OUT FOR NON PAYMENT OF RENT. I prefer the easy way to rid yourself of such people: In a month to month lease, all you have to do is give obnoxious tenant a polite 30 day notice that this current arrangement is being terminated… No REASON for doing so is required….

    • Denise

      Hazel, Great point, thanks

    • Linda

      The CA laws favor the tenant. The tenant can break a lease (if they leave, they leave), but the landlord cannot. A monthly contract allows the landlord to (legally) raise the rent and/or evict as needed. We screen tenants carefully and ask questions to determine if they’re looking for short- or long-term commitments.
      We also tell the tenant that rent raises are direct reflections on your timely payments. If you’re late, expect the rent to go up accordingly. Definitely an incentive to pay on time.

      • robert porter

        if I break my lease because of unsanitary conditions on a new lease can I expect full security deposit reimbursment and within the 21 days they have in normal move out?

    • ted budding

      I need to know as much about what my rights are,i already have two renters here,but I didn’t have then sign anything when they moved in can I now go about doing it now

  • duane

    I found a roommate, a woman and her 17 year old daughter, via craigslist, both of whom moved in with a verbal agreement on October 1st 2014 I have a lease with my landlords, which expired November 1st, 2014. This new roommate paid her half of rent for October, but no utilities. She balked when Novemeber 15th rolled around, then after much drama and a disappearing act she came at me with 6 pages of nonsense and would not pay the rent owed. She claimed she only owed rent for the square footage her and her 17 year old daughter used. She also claimed she only owed money for the usage periods of any utility bills.

    Within the first month of living here, she and her daughter both had their boyfriend stay, the mother usually had sleep overs out in the living room, for many nights in a row, which irritated me, as my bedroom has two glass french doors and is right outside the living room area. Not to mention he smoked his E-Cig without even asking permission. Basically, they kept late night hours, were loud enough to disrupt my sleep and I have a 5 year old son 75% of the week. I found the situation to be getting unbearable and felt encroached upon, so I asked her to share the bedroom with her daughter, which was our verbal agreement. I did write short letter explaining my concerns about the living situations and this was in the middle of her taking off for days at a time, only coming home to drop off food and grab personal items randomly.

    So everything escalated very quickly after she came back “home”. I was berated and yelled at, yelled back some and then was given a 6 page summary of her grievances towards me and she ranted on about evicting me and finding a roommate to replace me! So I asked around, browsed online for legal advice, talked to an ex judge and finally had a sit down with 2 attorneys. I ended up having a friend serve the 14 day eviction notice, with all the required language and copies of bills/rent checks paid/posted, the lease I resigned for Dec. 2014 and basically tried to make sure I didn’t leave anything to chance.

    I am told she has a tenancy at will and so the 14 days for non payment of rent should be good. After the 14 days is up I can then get a court hearing if she hasn’t paid up in full. I am hoping it doesn’t come to that but this whole thing is a nightmare during the holidays and one that I wouldn’t wish upon anyone, ever.

    There are certain things I have been told I may have screwed up on, such as not informing her of the tenant’s rights handbook or giving her the landlords names and addresses in a timely fashion, even though it is posted in the front entry, and I had the names and phone numbers on the wall by the house phone for 30 plus days. Also we have roommates upstairs who rent a separate part of the duplex who would have been more than happy to inform her of any and all pertinent information. But in any case, she did her own research and has the info, which she emailed to me. I think she has written about 15 pages of grievances to me so far. I have not responded to any of it, in writing or through emailing. We have had verbal altercations and she has tried to intimidate me and bully me into thinking I am not the landlord, I cannot evict her and if I slam a door or cupboard too hard it will endanger her daughter’s safety.

    I am at my wits end and Christmas is 3 days away. Help!

  • Bryant schroder

    My wife and I have been renting a month to month contract home for 7 years. I have always paid the rent. But only signed the contract once at beginning. I haven’t signed anything since first day. Now my wife has got a job loss all her weight and decided to cheat on me and decided to divorce me. She went to the landlord and convenced him to convict me only because she has no where to go with kids. So he left a conviction on door in my name only. With no reason just my wife said am divorcing him kick him out. Can he evict me. Please help.

    • Lucas Hall

      Hi Bryant

      I’m sorry to hear about your situation.

      A landlord cannot evict anyone simply because of a divorce. However, depending on how your original lease was written, you may only be in a month-to-month agreement.

      If your original lease was a fixed term and specifically auto-renews, then you might have a yearly lease – which would give you more security.

      But if it doesn’t automatically renew, then you have probably had a month-to-month agreement for the past 6 years.

      Each state has its own rules on terminating a month-to-month, but generally speaking, a landlord can end it very quickly. Check out http://www.landlordology.com/state-laws and do some research based on your state.

      I hope that helps. Please know that I’m not a lawyer, nor is this legal advice.

  • robert porter

    we are in a new 12 mo lease and a 20 ft carpet stain that was documented prior to move in came back in full force and we are told it is pet and it smells bad,almost two months into lease now and it has not been taken care of,landlord says yhey will replace carpet,can we get out of our lease because of this and get full deposit back,house is in great shape otherwise but we fear health issues because my wife suffers from migraines

  • Jeremy

    Hey chris, I have leased my home for 2 years now and the landlord just sold the property, the new owners live out of state and use a management company, my question is do you think that it would be wise to sign a lease with this new property management company or go month to month. I am worried that they will try to raise my rent because they are able to get more than what I pay. I know it probably doesn’t matter but they are a very unfriendly company from what I’ve noticed so far and they seem to want to get every dime they can.

  • Roni

    I rented out a house to two renters, both signed the lease, now they have broken up and the remaining tenant wants the other taken off the lease. She is behind on payments and was told nothing would be considered until payments are up to date. If that happens, what do I need to do to remove the other person? I have not heard from the other person at all.

  • clementine hamilton

    Can I get my deposit back if I didn’t sign a lease

  • Lisa Henderson

    I’m planning on renting out my house in Washington state. I would like to do a 1-year lease which, at the end of the year, reverts automatically to a month-to-month tenancy..at which point either Landlord or Tenant can terminate the tenancy with at least 30 days notice – and I would write all of this clearly in the lease agreement. Would that be OK and legal in Washington state? I guess I’m also wondering if I can do this all on the original lease agreement or if I need to have the tenants sign a month-to-month rental agreement after the 1 year period is up.

  • Robert porter

    HELP, we have been renting for 11 months on a 1 year lease and need to move , do we have the right to give 30 day notice prior to the end of lease or do we have to give it exactly 30 days prior , our lease agreement has no mention of requirement upon ending of lease and the landlords just asked us if we want to renew another year lease , we have to move ( personal reasons).so by law what is our course of action ( we had planned to give 30 day notice on the 15th of this final month)
    2nd is it California law ,that unless stated otherwise in the lease that rent automatically goes to month to month at the end of the lease?

  • Nancy Phillips

    I know you must use an attorney for a 2 year lease but Is it legal to make two separate one year leases, so one for 2017 and one for 2018.

  • Dean Wilson

    I am on a 12 month lease that expires on July 13 2017. I received a note on my door that I must sign a new lease before June 1 2017 with new rent increase or vacate the premises. I have been renting here for 10 years and the last 2 years a real estate company is handling the property because the owners live out of state.

    Is this legal to have a 12 month lease cut short? For no apparent reason that I can think of. My thinking is my rent can’t be increased until after lease is up.

  • Dee

    I have a rental agreement that states it’s a month to month,however it also indicates that it expires on 10-1-2017(10-1-2016to10-1-2017).The subleesse told me today that she is going to need the room for a family member starting next month.Basically I will have to move.I do plan on moving due to this whole situation,but what if I am unable to find a place within these next 3 weeks,shouldn’t I be allowed up to the remaining amount of time before expiration if I do need extra time to find a place?Not that I will require all of that time, but to be honest I don’t think I will find somewhere in 3wks.Let me just mention that this is completely random.I am not a bad tenant nor have I ever missed a months rent and I always paid on time.Thanks!

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