What is a lease agreement?

The lease agreement is a legally binding contract between two parties known as Lessor and lessee. A Lessor is someone who owns a property, and the person who wants that property on lease is the lessee.

The lease agreement outlines terms and conditions of the lease for a specific period. Typically, the agreement is for an extended period.

What is a rental agreement?

The Rental Agreement is a contract between the tenant & landlord/owner.
The person who owns the property is the landlord whereas the person who occupies the property on rent is known as the tenant.
The rental agreement is basically a month-to-month agreement for a shorter period.

Let’s understand the key differences between the lease and rental agreement.

Duration:

The core difference between a lease and rental agreement is the duration. Generally, lease agreements are long-term agreements valid for 12 months or more.
On the other hand, Rental agreements are on a month-to-month tenure for a short term.

Rent Stability:

Since the lease agreement lasts for a longer duration, the rent is fixed for the entire tenure. There is no fluctuation in rent. In the case of rental agreement, due to short-term agreement rent can be increased on the renewal of the agreement.

Flexibility:

Lease agreements are more rigid, as there is a lock-in period. During the lock-in period, lessor & lessee both can not terminate the contract on any basis except for the condition specified in the contract.
Rental agreements have a relatively short notice period. Both parties can mutually end the contract as required.

Security Deposits:

Both agreements require security deposits. For lease agreements deposit amount is much higher compared to rental agreements, since the duration is the key factor here.

To summarise, it is very important to know different legal and financial aspects of renting property along with understanding the rental and lease contracts.

While a lease agreement gives more stability, rental agreements are useful to those who are looking for short-term agreements. One can choose the type of agreement depending on their concerns and requirements.