Leasing vs. Renting: What are the Differences and Which Should You Choose?
By: ROS Team
When it comes to finding an apartment in the United States, renting and leasing are the two terms that pop up frequently. These two terms are used interchangeably, but they have different meanings in real estate.
If you are confused about the difference between an apartment lease and a rental apartment agreement, we’re here to help.
1- What is Leasing
2- What is Renting
3- Leasing vs Renting
4- Pros and Cons of Leasing
5- Pros and Cons of Renting
6- Lease Agreement vs Rental Agreement
What is Leasing?
A lease is a legal agreement that outlines conditions under which a landlord agrees to rent his/her property to a tenant. The agreement guarantees the lessee, also known as the tenant, the use of the property for a specific time and promises lessor, also known as the landlord, regular payment in exchange.
Generally, the lease agreement lasts for 12 months.
Both parties are bound to follow the lease conditions for a specified time and may face legal consequences if they fail to meet the lease terms.
Characteristics of a Lease Agreement
- In a lease agreement, the lessee holds responsible for maintenance. The use of the asset is clearly mentioned in the contract and the tenant is bound to follow those.
- As mentioned above, the minimum duration of a lease agreement is one year, and the tenant can opt to renew as many times as they choose subject to the landlord’s approval.
What is Renting?
Rent refers to a rental apartment lease under which a tenant uses the property or a part of the property for a short time – usually on monthly basis. The amount tenant pays to the landlord under a rental apt lease is called rent. The landlord controls the rental agreement and may change the conditions at any point.
Characteristics of a Rent Agreement
- Unlike a lease agreement, the onus of maintenance does not lie with the tenant in a rental agreement.
- A rental agreement covers a shorter period of time compared to a lease agreement. The maximum duration of the rental agreement is one year but it may be extended if both the tenant and landlord agree.
Key Differences Between Leasing and Renting
| Term | Leasing | Renting |
| Time | Signed for long term | Signed for short term |
| Parties | Lessor and Lessee | Landlord and Tenant |
| Maintenance | Responsibility of Lessee | Responsibility of Landlord |
| Change In Agreement | No changes are accepted | The landlord can change the agreement |
| Item | Lease agreements are for equipment and assets | Rental agreements are for properties and land |
Leasing vs. Renting – Pros and Cons
Pros of Leasing
From a landlord’s perspective, the lease is a more suitable option. Lease agreements are more stable and continue for a minimum of one year, which means a continuous income for a longer period. As far as the tenant is concerned, the lease is the right option only if he/she is looking for a living place for the long term.
Cons of Leasing
Once a lease agreement is signed, the rent gets fixed for a minimum of one year. And in an area where rental prices are increasing every month, a fixed lease amount means a loss of capital for the landlord.
Similarly, if you are a tenant and due to some reasons you have to leave the apartment, there is no way you can step down from the lease agreement unless the lease period expires.
Pros of Renting
Due to the short duration, rental agreements give more flexibility to landlords in terms of rental income. In the US real estate, where property rents are increasing frequently, landlords can increase rents according to the local real estate market even on a monthly basis.
Similarly, a rental agreement is ideal for those tenants who don’t want to commit to a single apartment for 12 months.
Cons of Renting
For landlords, quick tenant turnover is a major concern because he/she has to pay extra for advertising the vacancy, agents’ commissions, and cleaning costs. Plus, if your apartment is located in a low occupancy area, chances are you won’t be able to find a renter anytime soon.
Likewise, tenants may have to pay higher rent to keep pace with a month-to-month rental agreement.
Lease Agreement vs. Rental Agreement: Which is Best for You?
Lease and rent agreements both have their pros and cons, but which works best for you depends on your needs. For example, if you are a college student looking for a short stay near the campus or you have just moved to the city for a short assignment, then the rental agreement is ideal for you.
While being a landlord, rental agreements would give you more flexibility over your property and you can plan renovation or maintenance at your desired time. Furthermore, you can also charge different rents depending upon the location and season.
Likewise, a lease agreement binds both the lessee and the lessor in the sense that a lessee can’t leave the property before lease expiration and a lessor can’t increase the rent before 12 months. So, both parties feel comfortable with the security provided by a lease agreement.
Read Also: Tips for International Students to Find Apartment in NYC
Still Hesitant?
If you are still unsure which way to go, consider this: A rental agreement is for those tenants who are looking for a short term living arrangement, while a lease works best for tenants who want to make their rental apartment home for the long term.
Conclusion
Leasing and renting are two different terms but sound the same to a layperson. Therefore, it is important to fully understand their differences. As a final point, laws governing lease and rental agreements vary based on the state; as a tenant or a landlord, it is important that you know the laws that govern your locality.
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