What is the difference between for lease and for rent properties?
- Length of the contract
- Flexibility of terms
- Stability
- Maintenance responsibilities
- Payment
- Expiration option
When it comes to choosing a residential place, you might be wondering about whether to rent or lease. Although these terms are often used interchangeably, keep in mind that there is a clear difference between for lease and for rent properties. Both lease and rental agreements are considered to be legally binding. However, each one serves a distinct purpose. In this guide, we rounded up the key difference between for lease and for rent properties. Read on to make an informed decision for your next home!
Length Of The Contract
For lease contracts, the lessor and lessee should come to an understanding that the lessee can occupy the property for a fixed period. The contract will also define expectation terms including payment, right of entry, damage to premises, rules regarding guests and pets, duration, and the like. Then, both parties will be legally bound to the lease. Neither can alter the agreement without consent from the other.
Rental contracts are similar to lease agreements. However, the main difference between lease and rent properties lies in the length of the contract. Whereas a lease will cover a longer duration specified in the agreement that is typically more than a year, a rental contract will typically be short-term—usually only a few months.
Flexibility Of Terms
In most cases, rental terms are effective on a month-to-month basis, automatically renewing at the end of each term period unless otherwise stated by either the tenant or landlord. With the permission of the landlord, the tenant may be free to change the terms of the agreement at the end of every month. These changes may include revising the initial agreements.
In for lease properties, neither party can change any terms of the agreement until the contract expires. Within the period of the lease, both parties cannot implement new guidelines that are not present in the original contract. In any event that either the lessee or lessor violates the contract, penalties can be incurred.
When you sign a lease agreement that lasts one year, keep in mind that you will have to strictly follow all the terms stated in the contract. If you for a month-to-month rental agreement, you will have more flexibility and freedom as a tenant.
Stability
Are you planning to stay in the place for a longer period? If stability is your main priority, leasing may be the better residential option.
As stated earlier, the main difference between leasing and renting is the duration. Many property owners prefer lease contracts compared to rental agreements because they are structures for a stable occupancy. As a lessee, you cannot vacate the property with an ongoing lease contract. For a lessor, taking in a lessee can cut down turnover costs and offer a more predictable income. As for rental properties, the agreement is signed for short-term.
Maintenance Responsibility
Another defining difference between a rental and lease property involves maintenance responsibility. Typically, the responsibility for maintenance in a rental contract lies on the landlord. The landlord must ensure that the property is inhabitable. This can involve making all the repairs to keep the property in good condition. Alternatively in a lease contract, the maintenance responsibility falls on the lessee.
Payment
Lease properties have a more stable term of payment. This is because the terms and conditions of a lease contract are clearly defined from the start. This is also legally binding until the contract expires. No alteration can be made by both parties within the time frame.
For example, if both parties agreed to a certain amount within one year. The payment will remain the same until one year. Contrary to rental properties, the payment amount and scheme could change. Given that the contract is short-term and the fee is paid every month, the landlord has the right to modify the agreement and raise the fee.
Expiration Option
Upon the contract expiration of a lease property, the lessee will be offered the option to renew the contract or purchase the property. Given its salvage value or the value after depreciation, the property can be bought for a significantly lower price. If you happen to love the place you are staying in, you can even go ahead and purchase it!
On the other hand, there is no such offer for rental property. Once the contract has lapsed, the only option the tenant has is to return the property to the landlord or ask for a contract renewal.
Key Takeaway
The question regarding lease or rent comes down to the choice of stability and flexibility. If you have concerns about choosing which one is best for your living situation, contact professional real estate broker John Yu and Daphne Yu by clicking the button below!