The terms ‘rent’ and ‘lease’ are used to describe a contract entered into between two parties, the person who owns the land (lessor/ landlord) and the person who wishes to occupy the land (lessee/ tenant). Usually both these terms are used interchangeably, however they are not the same.
Lease agreements may be defined as a contract between a lessor and a lessee where the lessee is given the right to use the lessor’s property for a certain amount of time, usually ranging from at least six months to a year in return for periodical lease rentals as consideration.
Rental agreements on the other hand are not long-term contracts and are usually month to month contracts. It effectively acts as a monthly lease agreement which expires at the end of each month and is automatically renewed with the agreement of both the parties involved until the parties mutually agree to end the agreement.
Points of differentiation:
The primary distinction between the two is its purpose, lease agreements are made for the purpose of a long-term contract which includes specific responsibilities on part of both the parties. Here, the term of the lease and its rent is fixed.
Alternatively, the purpose of a rental agreement is to enter into a short-term agreement. Here, while on a month to month basis the rental agreement is similar to a standard lease agreement, either the landlord or the tenant may on their discretion change the terms of the contract at the end of each month.
Advantages of the agreements:
Both these agreements have their own pros and cons.
Lease agreements are suitable when both the lessor and lessee want to lock in the agreement for a certain period of time so that the lessor gets the security of periodic rent for the specified period of time and the lessee gets to enjoy the possession of the property for that same period of time and also the lessee is only liable to pay the decided amount even if the value of the property goes up.
Rental agreements on the other hand are more advantageous when the tenant does not want to commit to and be bound by the contract for a long period of time. For the landlord, entering into a rental agreement means that they are not bound to receive a fixed rental and can alter the price of rent by simply renegotiating the terms of the agreement.
Important Inclusions and Clauses:
The tenancy and lease agreements must include the basic clauses such as the names of the party to the contract, the address of the property to be rented or leased, the amount of rent to be paid and when its due. Also, whether it is a month to month tenancy or a lease and in the case of a lease, the ending date must be specified.
Additionally, there must be a clause on the security deposit requirement which is the amount the tenant has to deposit at the beginning of the contract to cover any unexpected losses.
The agreement must specify that the extent of the tenant’s responsibility to maintain the premises and any concealed defect that is reasonable for the tenant to know about.
It is also advisable to have a subletting clause in the contract which requires the tenant to get the written permission of the owner before further renting the property to someone else.
Termination of a lease or rental agreement
The landlord is allowed to terminate the lease or rental agreement if the tenant fails to pay rent or violates any of the clauses in the agreement.
In order to terminate the agreement, the landlord must send a notice of termination to the tenant. If on receiving the notice also the tenant refuses to vacate the premises, the landlord may file for an eviction suit in court.