Leasing and renting out a property sometimes confuse people since they seem to be the same. The same goes for which agreement to use. Should you use a rental agreement or a lease agreement? Which is which? But some differences set these two types of contracts apart.
Let us first understand what each means. Read on to learn how these two agreements differ and what you need to know before signing one. Plus, we’ll provide free templates to help you jumpstart the process.
8 Downloadable Rental and Lease Agreement Templates
- Residential Lease Agreement Template
- Lease Purchase Agreement Template
- Rental Property Lease Agreement Template
- Commercial Lease Agreement Template
- Sublease Agreement Template
- Storage Rental Agreement Template
- Vehicle Rental Agreement Template
- Equipment Lease Agreement Template
What’s the Difference Between Lease and Rent?
While these two terms are sometimes used interchangeably, they differ in several key aspects:
Flexibility of terms
In most cases, rental terms are on a month-to-month basis. Often, a rental agreement automatically renews at the end of each period. But when it comes to leased properties, parties can only change the terms once the contract expires.
Duration
Rentals are shorter compared to leases. A typical rental period lasts 30 days, while a lease can extend for years. Again, rental agreements automatically renew when the term expires, while lease agreements don’t. You and the property manager will have to sign a new deal at the end of the contracted lease period.
Property maintenance
Typically, the responsibility for maintenance in a rental contract lies with the property owner. The property manager or owner ensures that it is inhabitable. It may involve all the repairs to keep the property in good condition. Alternatively, the maintenance responsibility falls on the lessee in a lease contract. It is the lessee’s responsibility to make any repairs during the length of the contract.
Mortgage rights
If the property owner defaults on their mortgage payments on a rental property, the lender can evict the tenant. The rental agreement is deemed void, and the tenant must vacate the premises immediately. On the other hand, in a lease agreement, the contract is still valid. The tenant can continue to occupy the property until the contract expires.
Let us take a closer look at the documentation associated with rent or lease arrangements.
What Is a Lease Agreement?
A lease agreement is a legally binding real estate contract between a property owner and a lessee. It gives the tenant the right to live in or use a property for a fixed time, typically 6-12months. After this period has elapsed, they can decide to either renew or terminate the agreement.
Both parties can negotiate the terms of the lease, but they must declare it in writing to be binding. The document must include the following:
- length of the lease
- monthly or annual payment
- security deposit
- utility responsibilities
- other rules or regulations
After signing, both parties must uphold their respective duties under the contract. If either party breaches the agreement, they may be subject to legal action. As such, it is essential that both parties carefully review and understand the terms of the lease before signing.
While lease agreements can vary depending on what state or country, they serve the same purpose: to protect both parties and establish clear expectations.
When to use a lease agreement
Commercial real estate
Commercial real estate pertains to properties that are intended for business purposes. You can use a lease agreement when renting an office, retail space, or an industrial building.
Equipment
Companies or individuals can also rent machinery. For example, a construction company may need to lease excavators or cranes for a specific project. This is a better option if you cannot afford the upfront cost of purchasing equipment.
Land
You’ll need a lease agreement if you want to use land from another party for agricultural, farming, grazing, or residential purposes. These agreements are also called ground leases or farm leases. The lease agreement should have specific clauses about buildings and other structures on the property.
What Is a Rental Agreement?
A rental agreement is a more straightforward contract. It is often used for residential purposes, such as apartments or homes. The tenancy is mostly 30 days but can be shorter or longer, depending on the agreement.
People who prefer a rental usually don’t want to commit to long-term housing. These include students, tourists, and seasonal workers. They may want to have the option to move out fast. As such, rental agreements are more common in areas where tenants usually stay for a short time.
When to use a rental agreement
Short-term rentals
As the name implies, these agreements can cover as little as 30 days. Renting an entire house, a room, or an accessory unit of residential homes for less than a month is considered short-term. Examples of short-term rentals are boarding houses, vacation rentals, or corporate housing. The maximum length can vary depending on local laws.
Subletting or subtenant
Subletting refers to a tenant finding someone else to occupy their rental property for a short time. The subtenant takes over the payment of rental fees during this period. Example situations where you may need to sublet are if you’re traveling for work or going on an extended vacation. You need the property owner’s permission to enter into this kind of arrangement.
Vehicle rentals
You can rent cars, motorcycles, and other vehicles for personal or commercial purposes. The rental agreement should include the vehicle make and model, rental period, price, and further relevant details.
What Should You Include in a Lease and Rental Agreement?
Both types of agreements will cover the following:
- names of the tenants
- rental property address
- start and end date of the lease
- monthly rent
- security deposit
- rental policies
- property owner’s contact information
Importance of Lease and Rental Agreements
Whether you’re a property owner or a tenant, it’s essential to understand the essentials of a lease or rental agreement. By studying the terms of each contract, you can choose the one that best suits your needs.
Property owners
A contract can help protect their rental property investments in the following ways:
1. Set clear boundaries and expectations
Agreements help prevent misunderstandings and disagreements about what the tenant can or cannot do on the rental property.
2. Claim possession of the rental property
Suppose the tenant violates the terms of the lease agreement. In that case, the property owner can begin the eviction process to reclaim possession of the unit.
3. Get payments on time
Lease and rental agreements help property owners get rental payments on time by specifying when and how tenants should pay. Reduce the risk of property damage Suppose the property owner includes a clause requiring the tenant to pay for rental property damages. In that case, it can help to reduce the risk of damage to the unit.
Tenants
Tenants should understand that lease and rental agreements are binding contracts. Once they sign the agreement, they are legally obligated to follow the terms and conditions stated therein. These agreements also serve to:
1. Protect tenant or renter rights
It can help remind property owners and managers of their responsibilities, such as making repairs to the rental unit or returning the security deposit at the end of the tenancy. As a tenant, you can use the agreement to hold your landlord accountable if they fail to uphold their end of the bargain.
2. Clarify responsibilities
Lease and rental agreements help tenants understand what is expected of them. For example, they need to pay rent on time as specified in the contract. They should also not damage the rental unit and follow the rules set by the property owner.
3. Prevent you from being wrongfully evicted
There are scenarios where a property owner may try to evict a tenant without reasonable cause. However, if the tenant holds an agreement, they can use it as evidence in court to prove that they have the right to occupy the unit.
Now that you understand the basics of lease and rental agreements, it’s time to start creating your own. You can start by using templates to create custom contracts for your rental property.
8 Printable Lease and Rental Agreement Templates
Save time and effort with Fill’s free templates. You don’t need to write an agreement from scratch. We have a wide variety of contract templates for different transactions:
1. Residential lease agreement template
You can use a residential lease agreement when renting out a house, apartment, or other forms of residential property. Property owners and managers typically include clauses that protect their interests, such as a security deposit and rental payment schedule.
2. Lease purchase agreement template
A lease purchase agreement is a contract that allows the homebuyer to occupy the house for sale for some time until the sale is complete. The buyer usually pays the seller a deposit, which is credited towards the home’s purchase price. The buyer also agrees to lease the property for a set period, typically one to three years.
3. Rental property lease agreement template
The rental property lease agreement is a contract between the property owner and tenant for residential or commercial real estate. You can use it for apartments, houses, office space, or other properties.
4. Commercial lease agreement template
A commercial lease agreement is a legally binding contract for the rental of commercial properties, including office space, retail stores, and warehouses. They are typically much longer than residential leases and often include provisions for renewal.
5. Sublease agreement template
Under a sublease agreement, the original tenant leases part or all of the leased premises to a subtenant. The subtenant agrees to pay rent to the first tenant. This kind of arrangement is only possible with the approval of the property owner.
6. Storage rental agreement template
A storage rental agreement is a contract outlining the terms and conditions of your rental. The deal will specify the size of the unit you are renting, how long you can keep your belongings in storage, and any restrictions on what can be stored.
7. Vehicle rental agreement template
A vehicle rental agreement is a contract between you and the individual or company that rents a vehicle for a specific time. The deal will specify the rental period, the rental price, any additional charges, and the terms and conditions.
8. Equipment lease agreement template
An equipment lease agreement is a contract where the lessee agrees to pay an agreed-upon sum to the lessor in exchange for the use of heavy machinery.
Manage your Contracts Using Fill
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Move forward with negotiations by choosing a more efficient way to close deals. Start now and see how Fill can help you streamline your agreement signing process.
