Lease Agreement or Rental Contract – Which is Best for You?

This article highlights the differences between lease agreements and rental contracts, and the pros/cons of choosing one over the other when renting to a tenant. 

Characteristics of Lease Agreement

A lease agreement requires tenants to pay on time and consistently on a set day of the month, and typically includes many other provisions relating to the tenancy. The lease contract lays out penalties and consequences, including possible eviction, if the rent isn’t paid on time.

The length of a Lease can be for any term up to 99 years. Most leases usually run from six months to 3 years on residential rentals, the most common form being a one-year lease term. Upon expiration of the lease, the tenant is required to vacate the property unless the parties agree to renew or convert the agreement into a month-to-month lease.  See Civil Code section 1945.

Characteristics of Rental Contract

A written rental agreement, by contrast, is a contract which generally runs from month to month. Rental agreements are just for the short term and, like most leases, specify monthly payment of rent.

Pros/Cons of Lease Agreement vs Rental Contracts

Rental contracts are attractive to tenants who need a place to stay briefly before moving to another city, or while they finalize the sale of their home, or when renting a vacation property, to name a few examples.  They can pose a disadvantage for landlords because there are periods in between tenancies during which the unit is not rented and is not bringing in rental income. As a result, landlords sometimes charge higher rents for month-to-month agreements.

Other considerations may come into play depending on the landlord’s specific situation.  For example, a month-to-month agreement is better for landlords if they expect to be doing renovations or may want to move into the property in the near future. Also, the landlord has more leeway raising rents under month-to-month rental contracts. Landlords are not bound by the same conditions of a one-year lease contract to hold the rent amount at the same price.

A lease agreement benefits the landlord by providing the stability of guaranteed, long-term rental income during the term of the lease. Under contractual law, tenants must pay rent for the entire length of lease on a monthly basis unless they are released from the obligation by mutual agreement with the landlord.  A lease agreement is advantageous to a tenant because it locks in the rental amount and length of lease and cannot be changed even if property or rent values rise.  Further, if the tenant abides by the terms of the lease and pays his rent in full on time, he may not be evicted.

Verbal Agreements

Verbal agreements can cause problems in the landlord-tenant relationship. Written agreements are much more reliable and set forth the terms in writing, minimizing  ambiguities in the obligations of the parties.  Additionally, if something goes wrong oral agreements can be difficult to prove. 

Please contact Lynx Legal with any questions regarding the above, or if you are ready to start an eviction case.  We can be reached at 888-441-2355 or info@lynxlegal.com.  Our experienced professionals are standing by to answer any inquiries or complete the intake for your eviction case.