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Posted By: Melrose Realty

The rental market is already very perplexed as it is. Navigating it can be confusing when you don’t have the required knowledge. They say a little knowledge is dangerous, and it very well applies to this scenario.

Having adequate information about lease and rental agreements is crucial in the rental market. These agreements are important contracts that outline the terms of one party deciding to rent an asset of another. It is important to know that there is a subtle difference between these terms, despite their common interchangeability. While both agreements are legally binding, each serves a different purpose.

Let’s understand more about them below!

What is a lease agreement?

A lease agreement defines the term of a tenant’s stay in a property and is a contract between a landlord and a tenant. The rental time usually ranges from 6 months to 12 months. Many landlords require their tenants to sign a lease agreement before moving into the property.

A lease agreement outlines the terms and conditions of the contract. It also includes how long the tenant will live on the property and make regular payments to the landlord. Since it’s a binding contract, a lease has provisions to prevent contract disputes. It also outlines expectations from both the parties, such as rent, payable dates, usage restrictions, etc.

A typical lease doesn’t automatically renew after the contract expires. The landlord is also not obligated to renew the lease after the term ends.

It is crucial to understand that neither party can change the terms and conditions of the lease. The landlord cannot just increase the rent on a whim, nor can the tenant leave before the lease expires. A lease agreement is legally binding, so you should only sign it after careful consideration.

What is a rental agreement?

The rental agreement is similar to a lease but is subtly different. The most distinctive factor between the two is the length of the contract. Tenants and landlords sign monthly rental agreements. Unless otherwise noted by either party, a rental agreement automatically renews at the end of each term which is a month.

Just as in the lease contract, similar stipulations are included in a rental agreement as well. These include terms of tenancy, rent amount, included items, and usage restrictions.

Since it is a short-term contract, the landlord can raise the rent or ask the tenant to leave the property without violating any terms of the agreement. However, if the landlord does decide to ask the tenant to quit the premises, they have to give a proper 30-day notice.

Key differences between rental and lease agreements

By now, you may have understood what lease and rental agreements are. Let’s explore their key differences below:

1. Lease and rental agreement duration

When it comes to a lease agreement, it is usually a long-term agreement. As long as both parties – the tenant and the landlord, agree, it is possible to write a lease at any time. Typically, the standard duration of a lease agreement is 12 months. However, to suit either of the parties, it can also have a duration of 6 months.

When it comes to a rental agreement, it is usually a short-term agreement. It is written on a monthly basis. Unlike a lease agreement, it typically renews at the end of each month.

2. Length of the lease and rental agreement

The length of the agreement is the most distinctive factor between a lease and a rental agreement. While a lease agreement is long-term, a rental agreement is quite short-term. The length of a lease agreement usually varies from 6 – 12 months or even longer. On the other hand, the length of a rental agreement is only a month.

3. Rent payment structure

A lease agreement has two types of rent payment structures- gross and net. In a gross lease, the tenant pays the monthly rent, including all the occupancy costs. On the other hand, in a net lease, the tenant pays the base rent plus a percentage of the operating expenses for the property. The amount of rent changes once the lease expires.

In a rental agreement, the tenant pays a specific amount of rent to the landlord at the end of every month. The landlord can raise the rent upon the renewal of a rental agreement allowing for ways to maximize rental income.

4. Renewal and termination

Neither the landlord nor the tenant must renew the lease agreement once the term ends. If they want to renew it, a new lease agreement must be signed between them. However, lease extensions are also available where the tenant pays the rent monthly after the tenancy has expired. A lease can be terminated when the tenant fails to pay the rent, violates the terms and conditions of the agreement, and violates the law.

A rental agreement renews monthly upon agreement between the tenant and the landlord. Just as with the lease, the rental agreement will also get terminated if the tenant fails to pay the rent and violates the terms and conditions of the contract.

5. Rights and Responsibilities of Tenants and Landlords

Generally, the rights and responsibilities of the parties are similar for both the lease and rental agreements. The tenant’s responsibilities include:

  • Paying the rent on time.
  • Keeping the rental unit clean and free from damage.
  • Not conducting anything illegal in the rental unit.
  • Moving out of the property as per the notice given by the landlord.

The tenant must also follow the landlord’s other policies, such as no pets allowed.

Similarly, the landlord’s responsibilities include:

  • Providing a habitable space to the tenant.
  • Not interfering with the tenant’s possession of the property.
  • Ensuring that the property meets certain housing standards.
  • Giving the tenant a valid reason in case of termination of the contract.
  • Giving the tenant at least 3 months’ notice before increasing the rent.

6. Terms and conditions

The terms and conditions included in the lease and rental agreements are pretty similar. They are as follows:

  • Names and contact information of the parties
  • Address of the property you own
  • Terms of the tenancy and how it ends
  • Rent amount, security deposit, and mode of payment
  • Utility inclusion or exclusion
  • Whether pets are allowed
  • Rules of the tenancy

7. Legal considerations

In a lease agreement, neither the landlord nor the tenant can change the terms and conditions until the contract expires. The tenant has to pay the monthly rent and cannot quit the premises until the end of the agreement. Similarly, the landlord cannot increase the rent or ask the tenant to leave before the contract ends. They are punishable by law if either party breaches the terms and conditions.

Since the contract is only a month-long, changes can be made frequently in a rental agreement. Like the lease agreement, the tenant must pay the landlord the monthly rent. However, they are not obligated to stay in the property after the agreement expires. If the landlord wants the tenant to go immediately, they can give the tenant about a month’s notice asking them to vacate the property. Both parties can be legally punishable if they violate the contract’s provisions.

How to create a lease and rental agreement?

When it comes to creating a lease or a rental agreement, here are some easy steps that you can follow:

  • Outline your agreement with clear headings such as property, contract duration, rent, deposit, utilities, occupancies, rights and responsibilities of the parties, etc.
  • Determine necessary and important provisions and the conditions you would like to address.
  • Consult local laws or a real estate professional to include provisions and clauses that follow the law.
  • Fine-tune the terms of the agreement and include a heading and signatures of both parties.

If you need assistance creating your own lease and rental agreements, contact Melrose Realty today! We are your rental property management experts. We highly prioritize your needs and concerns. We also offer services like marketing the property, vetting potential tenants, collecting rent, scheduling maintenance, keeping records, and handling rental emergencies. Look into our resource on property agreements for more info.

What is better, a lease or a rental agreement?

The choice between a lease and a rental agreement entirely depends on the type of contract you want to be bound by. A lease agreement may be for you if you’re a landlord who likes stability and a fixed, long-term income stream. A lease agreement may also appeal to you as a tenant if you prefer to change housing frequently, paying a fixed amount of rent.

A rental agreement is for you if you’re a landlord who is unsure about your tenant but still wants an income. A rental agreement is for you if you’re a tenant frequently moving and prefer to avoid being bound by long-term contracts.

The choice depends on your unique circumstances.

Consult Melrose Realty for Property Management Services in Oklahoma

If you are looking into managing your properties and want professional consultation on making the best choices, then contact Melrose Realty in Edmond and OKC. We have experience in commercial, residential, office, rental property, retail property, and multi-family property management.


Whether you choose a lease or rental agreement, both have pros and cons. To make an informed decision, reach out to us today!

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