The Lease vs. Rental Agreement

A rental agreement establishes a tenancy for a short period of time, usually one month. A month-to-month rental agreement is automatically renewed each month unless you or your tenant gives the other the proper amount of notice (typically 30 days) and terminates the agreement. You may increase the rent, change other terms of the tenancy or terminate it on relatively short notice (usually 30 days)--unless local rent control ordinances specify otherwise. Many landlords prefer to rent month-to-month, particularly in tight rental markets where new tenants can be easily found and rents are trending upwards. The flip side is that month-to-month tenancies almost guarantee more tenant turnover.

A lease obligates both you and the tenant for a set period of time, usually a year. You can't raise the rent or change other terms until the lease runs out, unless the lease itself provides for modifications or the tenant agrees in writing to the changes. In addition, you usually can neither ask the tenant to move out nor prevail in an eviction lawsuit unless the tenant fails to pay the rent or violates another important term of the lease or state law. At the end of the lease term, you can either decline to renew it or negotiate to sign a new lease with the same or different terms. Landlords often prefer leases in areas where there is a high vacancy rate or where it is difficult to find tenants for certain seasons of the year--for example, in college towns that are often deserted in summer. Not only should a lease be thorough, it should also be legal. Be sure your lease or rental agreement complies with all relevant laws including rent control ordinances, health and safety codes, occupancy rules and anti-discrimination laws. State laws are especially key, setting security deposit limits, notice requirements for entering rental property, tenants' rights to sublet or bring in additional roommates, rules for changing or ending a tenancy, specific disclosure requirements such as past flooding in the rental unit and more. See your state's landlord-tenant statutes for details.