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Rent Agreement vs Lease Agreement

If you are going to invest in rental property you need to to understand the fundamental differences between rent and lease agreement.


Rental agreements and lease agreements are legally binding and often used for the same thing, but they have different meanings. They are similar in nature but different in application. It is important to understand the difference between these two terms. Continue reading to understand the difference between Rent and Lease Agreements.

Before settling in a new property, whether it’s a rental or you bought it up, the current owner will always make you sign a legal piece of paper. The legal agreement should be followed before shifting into a new property to avoid future mishaps. However, there are two types of agreements, i.e., Rent Agreement and Lease Agreement. 

What Is A Lease Agreement?

Before shifting into a rental property, the owner asks you to sign a legal document called a lease agreement. It gives the tenant the legal right to live in the property for a specific period, most probably for 6 to 12 months. The lease agreement ensures tenants that the owner cannot raise the property rent any month without the consent of the tenants. Moreover, it also includes that tenants can’t quit the property whenever they want. This agreement bind the 

The lease agreement dignified the length of stay and monthly rent for the tenants. If the tenant is willing to stay more in the property after completing the duration mentioned in the Lease agreement, he needs to sign a new lease agreement.

A land owner isn’t committed to recharging the conditions of the old rent and is allowed to change terms and rental sums whenever wanted. Consequently, a few occupants like to sign a more extended term lease, especially in a space where rents will probably increase during the term of the rent.

“Apply for your Rent and Lease Agreement with help of our Expert team.”

What Is A Rental Agreement?

The Rental agreement is also legally binding between the owner and the tenant wishing to live on the owner’s property. However, it differs from the Lease Agreement. It is not a long-term contract. As a base, the agreement represents the parties involved, i.e., owner and tenants, the property, rental amount, and how many leases for the term.

Rental agreements are revised and renewed every month. Moreover, only the tenants or the owner can revise and alter the term and conditions at the end of every month. The landowner has the choice to raise the lease or request that the inhabitant quit the premises without disregarding the tenant contract. A landowner should give a legitimate 30-day notice to stop, in any case, before asking the occupant to leave the property.

Pros and Cons of Rent Agreement and Lease Agreement 

Aspects Lease Agreement Rental Agreement

– Stability: Offers stable, long-term occupancy, providing landlords with predictable income. 

– Potential Cost Savings: Reduces turnover costs associated with frequent tenant changes.

– Rent Flexibility: Allows for more flexibility in adjusting rent, and adapting to market changes. 

– Attracts Short-Term Renters: Ideal for those seeking short-term commitments, high demand near colleges or hospitals.

Cons – Fixed Rental Cost: Once signed, the rental cost remains fixed until the end of the lease, potentially missing out on incremental income.

– Tenant Turnover: Short-term agreements may deter long-term renters, leading to increased costs for landlords (advertising, screening, cleaning).

 – Market Dependency: Challenges in keeping units rented for extended periods in areas with low occupancy rates.

What Are The Differences Between The Rent And Lease Agreement?

Rental and lease agreements have a lot of differences. A few of them are mentioned below. 

  • Tenure: The lease agreement is signed by lessee (tenant) for acquiring property for a long period of time whereas a rental agreement is signed by tenants allowing them to use property for a shorter period
  • Accounting standards: Leasing agreements depend on accounting standard 19 (AS-19), whereas there is no specific accounting standard that is continued in a renting agreement
  • Parties: the parties involved in the Lease agreement are known as the lessor and lessee. Those signing a rental agreement are known as landlords and tenants
  • Maintenance: In leasing, the lessee is obligated to support the property. Whereas in renting, the resource’s maintenance burden lies on the occupant
  • Change in agreements: Once the lease is signed, neither the lease nor the lessor can change the terms and conditions for the specific period. However, in a rental agreement, the landlord can change the rent, terms and conditions anytime they choose
  • Consideration: In a lease, the monthly instalments are paid, but in a rental agreement, the rent is paid monthly or quarterly for using the property asset
  • Offer at expiry: once the deadline is over, the lessee is asked to buy the property or resource, whereas there is no such offer given to the tenant by the landlords.

What Is Included In The Rent And Lease Agreement?

  • Name of the tenant occupying the property and name of the owner to whom the property belongs.
  • Contact information of the landlord.
  • Length and type of tenancy to determine whether the agreement will be lease or rental.
  • Cost of rent, terms and conditions, money transfer methods, and security deposit.
  • Specifics regarding the person responsible for utility charges.
  • Additional charger for pet, parking, and other accommodations. 
  • Damage and Alteration to premises.


Both the agreements have different meanings, but to a layman, they may sound similar. Hence, it is important to go deep into the concept and understand it. A rental contract is a viable option for landlords who are focused on flexibility, particularly in areas that see quick tenant turnover, such as college towns.

A lease is a great option for landlords looking to earn a stable income but may negatively impact profitability if the property or area value increases within a year. To understand what will be best for you, you can avail our consultancy anytime you want by visiting Vakilsearch

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