What are the differences between a rental agreement and lease?

What are the differences between a rental agreement and lease?

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If you are a landlord, you may encounter the terms ‘lease’ and ‘rental agreement’ used interchangeably but is this correct?

It is common for many people to use these terms when discussing a document that binds a tenant to a rental property, and this is true. However, the difference lies in the type of tenant; as a rule of thumb, contracts pertaining to a residential occupancy are tenancy agreements, while those concerning the rental of a business or commercial space are called lease agreements.


Rental agreements




If you are a landlord with a flat, house or HMO to rent to residential tenants, you’ll need a rental agreement.

This rental contract outlines vital things such as the length of the tenancy term, or guidelines for what is known as a ‘rolling rent’, which means the tenants are occupying the property on a month-to-month basis with no fixed tenancy term. It will also contain information about property management, rent collection, repairs and maintenance, and termination of tenancy terms. The National Landlord Association issues an Assured Shorthold Tenancy Agreement (AST), which is the standard document for all residential lettings in England and Wales (provided rent is no more than £100,000 per year and the term is no longer than seven years).







If you have a commercial property, you will need a rental lease agreement. This provides exclusive possession of the land and property on it, meaning the lease is for all intents and purposes the owner of the premises for the duration of the lease.

This means they are responsible for things such as fixtures, fittings, health and safety, structural repairs, electrical wiring and exterior maintenance. If you are looking for a more permanent venture, this is a great choice as it provides both landlords and occupant with stability.

It’s imperative that no matter whether you’re making an agreement for a lease or a rental agreement that it’s always written – an oral agreement is rarely a good idea. A verbal tenancy agreement is legally binding, and so it can be difficult to settle any disputes should they arise without any written terms and conditions to refer to.


In conclusion


There are benefits to both a lease and tenancy agreement, and it’s always wise to defer to a template issued by a recognised governing body rather than drafting your own. If you are unsure of how to obtain such a document or if you would rather leave this in the hands of a professional, many property management and letting companies offer lease agreement drafting and signing as part of their services. This alleviates time and stress from your schedule whilst ensuring you remain compliant as a landlord.


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