Is There Any Difference Between Renting & Leasing an Apartment?
While some people use the terms "renting" and "leasing" interchangeably, they can also have different meanings. "Rent" refers to a financial arrangement in which a tenant pays the owner of a home for the privilege of living there. A "lease" is the agreed-upon duration of time in which the tenant can continue to live in the home.
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Rental Agreements vs Leases
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When a landlord rents a home to a tenant, both parties enter into a contract. While most states recognize the legality of oral agreements (also known as "oral leases"), most landlords and tenants choose to put the agreement in writing. If a tenant rents from a landlord on a "month-to-month" basis, without any set limits or obligations for staying in the rental home, their written contract is usually known as a "rental agreement". If the tenant agrees to stay in the home for a specific period of time, such as a year or two, the written agreement is often known as a "lease."
Rental Agreements
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A rental agreement spells out the responsibilities of both landlord and tenant to each other, including the amount of rent, the date that rent is due, and who pays the bills for utilities and other services. Rental agreements automatically renew when rent is due, unless landlord or tenant decides to end the agreement. Either landlord or tenant can terminate the agreement or change the rental terms, such as raising the rent, on short notice (usually 30 days).
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Leases
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A lease functions similarly to the rental agreement, except that it typically covers a longer period of time (a year is common), and does not automatically renew when it expires. Once a landlord and tenant sign a lease, neither party can terminate nor modify it except by mutual consent or if the law permits an eviction or lease termination due to the misconduct of either landlord or tenant.
Tenant Issues
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For tenants, rental agreements provide a great deal of flexibility, while leases offer stability. With a rental agreement, a tenant whose job requires relocation can easily pick up and move. That's not always possible with a lease: If the landlord doesn't agree to let the tenant out of the lease, the tenant has to pay rent for the rest of the lease term, or until a new tenant moves in. On the other hand, a tenant who only has a month-to-month rental agreement is vulnerable to losing her home or having her rent raised with only a month's notice. A lease also survives foreclosure, while month-to-month tenants can be evicted with 90 days notice after bank or new owner takes over a foreclosed property.
Landlord Issues
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Landlords who live in tight housing markets can benefit from rental agreements in that they can move troublesome tenants out quickly and raise rents at will. On the downside, landlords who only offer rental agreements might find themselves spending a lot of time finding and screening new tenants to fill their rental units. A lease provides landlords with a greater likelihood of a secure cash flow, as it obligates the tenant to pay rent for a specified period of time.
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