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  • Daniel Rodriguez

What is the difference between leases and rental agreements?

Updated: Jun 17

Tenant issues are a complex field of law in the state of California. While the idea of a tenant renting from a landlord may seem simple, conflicts that do not have clear resolutions may need to be settled in court. You should also be aware that the state has clear legal distinctions between leases and rental agreements. What you have can determine your rights under the law.

What is a lease?

A lease is an agreement between a landlord and tenant that can exist in either written or oral form. This agreement creates the legal relationship between the landlord and tenant and governs landlord/tenant matters going forward. Rules outlined may include stipulations regarding rent, altering the property or the ownership of pets. Usually, the lease may be binding for six months to a full year.

What is a rental agreement?

Alternatively, a rental agreement has key differences from a lease. Like a lease, the rental agreement will go over the landlord/tenant relationship. However, the biggest difference is that a rental agreement typically covers a much shorter period, typically one month. After that month, the agreement may be renewed for another month or be dissolved. After one month, the terms of the agreement may be altered.

The pros and cons of each

Each choice has its own pros and cons based on their differences. The pros of leases include:

  1. They are designed to last for the long term

  2. They are designed for stable occupancy

  3. They provide more predictable revenue for the landlord

The cons of leases include:

  1. The cost of rent cannot change during the lease

  2. The landlord cannot offset changes in property value with rent increases

  3. The renter or landlord has fewer options for getting out of bad agreements

The pros of rental agreements include:

  1. Their short term nature allows for more flexibility

  2. Rent can be increased or decreased each month

  3. Both the landlord or renter can more quickly get out of a toxic agreement

The cons of rental agreements include:

  1. Renters may leave more often with end-of-month agreements

  2. The ability of a landlord to predict income streams may be lessened

  3. The renter has less long term security

In practice, leases and rental agreements can produce very different outcomes for both the renter and the landlord. Regarding either contract, both parties should consider the legal consequences carefully before entering into such an agreement.

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