What’s the Difference Between a Lease and a Rental Agreement?

Understand the nuances of rent vs. lease, before you sign on the dotted line.

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What Is the Difference Between Leasing and Renting?

When gearing up to move, you might come across jargon that seems redundant—and maybe a little boring—like ‘lease’ and ‘rent’. Both terms are related to signing an agreement to live in a property owned by someone else, but there are some key differences to keep in mind.

Essentially, a lease is a long-term commitment, typically lasting a year or more, with fixed conditions that remain stable over the period of the agreement. A rental agreement, on the other hand, generally refers to short-term arrangements—often month-to-month—where the terms may be subject to change. 

Let’s get into the fine print.

What is a lease agreement?

A lease agreement for an apartment lays out the rules that both a lessor (the person renting out the place) and a lessee (the person moving in) agree to follow for a specified length of time—which is usually a year.

This legally-binding real estate agreement outlines important details such as the rent amount, payment options, the duration of the rental period, notice to vacate, and the process for returning the security deposit once the tenant moves out. These terms typically cannot be changed during the time specified in the lease, unless agreed upon by both parties.

By clearly stating all terms, a lease agreement provides protection for both the tenant and the landlord. It sets clear expectations, so if there are any issues or misunderstandings, both parties can refer to the document to resolve them.

Pros and cons of a lease agreement

Here are some of the advantages and disadvantages of locking into a fixed, longer term agreement: 

Pros of a lease agreement

  • Stability: Fixed rental period and monthly payments
  • No sudden rent increases: Rent amount is locked in for the term of the lease (unless otherwise specified)
  • Security: Less risk of notice to vacate if you comply with the terms

Cons of a lease agreement

  • Less flexibility: Difficult to move out before the end of the term without financial penalty.
  • Long-term commitment: May be stuck in a situation if your circumstances change and the property no longer meets your needs.
  • Limited ability to negotiate: Once a lease is signed, the terms, including rent, cannot be changed until renewal, which might limit your negotiating power over the lease period.

What is a rental agreement?

A rental agreement is a rental contract that often works on a month-to-month basis, offering flexibility for both the renter and the property owner. Rental agreements typically renew each month, and terms—including rent prices—can be adjusted with proper notice, usually 30 days.

Month-to-month rental agreements can be ideal for short-term stays, for renters who require flexibility due to uncertain job commitments or other factors, are looking for temporary housing, or who may need to vacate on short notice.

Pros and cons of a rental agreement

Let’s weigh the implications for renters of signing a short-term rental agreement:

Pros of a rental agreement

  • Flexibility: Can leave the property at the end of each month—or a shorter time period than a lease agreement—without breaking a contract.
  • Short-term commitments: Ideal for those not looking to stay in one place for long periods.
  • Adjustable terms: Terms can be changed with proper notice, providing some adaptability if your circumstances change.

Cons of a rental agreement

  • Lack of stability: Rent can be increased or the terms changed with minimal notice.
  • No long-term security: Risk of eviction if the landlord decides not to renew the agreement.
  • Frequent re-negotiations: The flexible nature of a rental agreement means terms like rent amounts and lease conditions might be renegotiated frequently.

Lease vs rent

make sure to understand the differences between a lease and rental agreement before signing

While both lease and rental agreements involve a legal arrangement between a tenant and a rental property owner, the key differences lie in the term length and flexibility of the terms. 

Lease agreements are synonymous with longer commitment and stability, making them suitable for renters who wish to establish a more permanent home base. In contrast, rental agreements offer greater flexibility, perfect for those who value the ability to move freely and adapt to life’s changes without severe financial repercussions.

Before we go…

By understanding the difference between lease and rent, you can better assess which type of agreement aligns with your current needs and future goals, ensuring you make the best decision for your living situation.

And once you sign on the dotted line, why not safeguard your stuff with renters insurance?

A Lemonade renters insurance policy covers your personal property against theft and damage, plus legal claims for damage or injury you accidentally cause others. Also, if your home becomes unlivable due to certain types of damage we’ll help cover the costs of temporary living arrangements.

Learn more about what renters insurance covers, or click below to start your free quote. It’s quick, easy, and dare we say even kind of fun.

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A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage and discounts may not be available in all states.


Please note: Lemonade articles and other editorial content are meant for educational purposes only, and should not be relied upon instead of professional legal, insurance or financial advice. The content of these educational articles does not alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. While we regularly review previously published content to ensure it is accurate and up-to-date, there may be instances in which legal conditions or policy details have changed since publication. Any hypothetical examples used in Lemonade editorial content are purely expositional. Hypothetical examples do not alter or bind Lemonade to any application of your insurance policy to the particular facts and circumstances of any actual claim.