Is there a difference between renting and leasing?
Difference between renting and leasing
On the lookout for a new place to call home, but can’t decide between renting and leasing? Many people are surprised to learn that there is a difference between renting and leasing, each with its own pros and cons during a rental period, whether it’s a short term or month to month rental agreement.
A generation ago, renting was seen as a temporary setback on the path to homeownership; today, more than a third of all Australian households are renters and not property owners. Leasing and renting are both accomplished through contracts, but they serve distinct functions when renting a house.
When comparing leasing and renting, what are the key distinctions?
difference between renting and leasing
Signing a lease agreement is a standard practice for landlords prior to tenants moving into a rental property. A lease is a legally binding agreement between two parties whereby one party agrees to let the other party use an asset such as a home or apartment for a predetermined period of time and under specified terms and conditions.
In exchange for consistent payments, the parties agree to enter into this lease contract for a period of six or twelve months. Similar to buying, renting entails a tenant making regular monetary payments to a landlord in exchange for housing.
The length of the contract is the primary distinction between leasing and renting. In contrast to renting, which typically covers periods of 30 days or less, leasing refers to longer commitments (typically 12 months).
Leasing is more commonly used than renting when referring to commercial real estate for reasons other than the duration of the lease agreement. However, the word “rent” can still be used to describe a recurring fee.
Exactly how do leases for real estate properties function?
difference between renting and leasing
Leases for specific durations are the norm in the Australian real estate market. Commercial leases typically run for six or twelve months, though other terms may be possible depending on the landlord’s availability.
The lease on some properties is periodic, meaning that either party can terminate it at any time by giving the other the necessary notice. If the landlord and tenant do not sign a new lease before the end of the fixed-term lease, the property may revert to a month-to-month lease.
A security deposit or bond is usually required at the beginning of a lease when renting from the landlord. This is a safety net for the landlord in case the tenant doesn’t pay rent usually four to six weeks’ worth. If the premises are left in good condition and undamaged when the tenant vacates, the security deposit or bond will be returned to them.
Rent is paid in accordance with the terms of the lease, typically on a weekly or biweekly schedule, and handled by the landlord, property manager, or real estate agent. A tenant can be served with a breach notice for nonpayment of rent. In addition, if the problem is not fixed, the tenant may be forced to move out.
Landlords have an obligation to their tenants to maintain the rental property in a habitable condition and to fix any issues that may arise. There is an obligation for tenants to ensure that they are in accordance with the terms of their lease, and tenants are typically expected to pay for repairs that they cause.
The Benefits and Drawbacks of Leasing and Renting
difference between renting and leasing
Housing stability can be achieved over a longer period of time through leasing, which is an advantage. If you, the tenant, have to vacate the premises before the end of the lease term, you are still responsible for paying the rent through the end of the lease term unless a new tenant is found to take over the remaining period.
Assume, for the sake of argument, that you and your live-in partner recently broke up and have decided to part ways, with both of you vacating the shared apartment two months into the lease’s remaining term. In accordance with the lease terms, you must keep up with rent payments for the remaining two months until a new tenant is found to occupy the space.
A lease doesn’t give you as much leeway as a rental agreement does, and that’s one of its drawbacks. Until the lease has been terminated, the landlord is not allowed to increase the rent or ask the tenant to vacate the premises without consequences.
Renting
difference between renting and leasing
When compared to a lease, a rental agreement allows for more manoeuvrability. If you give us enough notice, we can modify or terminate the lease agreement and allow you to move into the property.
Landlords face more risk when allowing for shorter lease terms because there is no assurance that a tenant will remain in the building for the long term, which can increase vacancy and turnover rates.
Concluding Remarks
difference between renting and leasing
Your individual situation will determine whether you should lease or rent your property. Renting is a great substitute for leasing if your requirements are malleable and you’d rather not make a long-term commitment.
On the other hand, if you prefer the security of legally binding terms, leasing could be the better option. Consult with one of our knowledgeable real estate attorneys today if you have any remaining questions.
