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A lease agreement is a legally-binding contract between a landlord and a tenant which overs the lease of a property for a long period of time, usually 12 months or more. The document outlines the terms of the lease for each party, and typically includes the cost of leasing, deposit required, date the lease money is due and other rules such as whether pets are allowed and sub-leasing policy.

Difference between a lease agreement and rental agreement

Lease agreement

The length of the lease and the amount of money charged is fixed. This protects the tenant, where the landlord can’t raise the rent if he wants to and he can’t ask the tenant to leave the property before the lease period is up. Likewise, a tenant can’t just leave the property without their being financial consequences.

When the lease period comes to an end, both parties must enter into a new lease agreement. You can’t assume that you can carry on leasing the property as the landlord is within his rights not to renew the lease. Often what happens when a lease agreement expires, both parties continue on a month-by-month rental basis.

A lease agreement offers both the landlord and tenant a degree of stability; however, it does lock both parties which can be problematic if either or both parties want to get out of the lease agreement.

Rental agreement

A rental agreement works on a month-to-month basis and there is more flexibility in the arrangement. The tenant pays rent each month on a specific date and may leave the property at any time, on the proviso he/she gives a proper month’s notice.

Likewise, a landlord is obliged to give a tenant a proper month’s notice if he/she wants the tenant to vacate the property. The landlord has the option to raise the rent at any time, also with a proper month’s notice.

Rental agreements give a landlord the opportunity to see how reliable and well-behaved a tenant is, and he/she can adjust the rental amount if there is a spike in costs. On the downside, it’s not a long-term arrangement and a high-turnover of tenants can be frustrating and costly.

What are the terms of a lease?

The terms of a lease agreement stipulate how much a tenant pays to lease the property, when they payment must be made, what deposit is required and when the lease agreement expires. Rentals are either paid weekly or monthly, and the lease period is generally 12 months.

At the end of the lease period, the agreement usually converts to a month-to-month basis; unless it’s stipulated in the terms of the lease agreement that a new lease agreement must be drawn up and agreed upon. This is when a landlord has the opportunity to give a tenant notice to vacate and/or increase the cost of the rental.

It’s recommended that a landlord puts a lease agreement be in writing and it’s signed by both parties.


What is a security deposit?

Most landlords require a new tenant to pay a security deposit. This amount covers the landlord if the tenant defaults on rent, breaks their lease agreement and vacates the property without giving proper notice or causes damages to the property and fittings.

A security deposit is usually the equivalent of one month’s rent and is paid before a tenant moves in. When you are vacating the property, you’ll get back your security deposit if you are up-to-date with payments, have given proper notice and there are no damages.

What is included in a lease agreement?

A basic written lease agreement should include:

  • names, address and contact details of the landlord and tenant
  • full address and description of the property
  • marriage status (married in or out of community of property); who stands security for rent payment
  • rental amount
  • when the rental amount will be paid (weekly, monthly)
  • a reasonable escalation clause (for increase in rental amount)
  • security deposit required; and whether it will be held in an interest-bearing account
  • lease period
  • notice period required
  • tenant’s obligations, such as keeping garden neat and watered
  • additional costs payable by the tenant (parking, water and lights)
  • list of defects
  • detailed inventory if furnished
  • house rules, if part of a sectional title (pets and/or visitors allowed, party rules and noise, parking etc.)
  • current date
  • signature of both parties

The lease agreement also stipulates provisions, such as:

  • penalty for late payment
  • what happens when the lease agreement expires
  • who is responsible for maintenance and/or cost of maintenance
  • rules about pets and visitors
  • when the landlord may enter the rental property
  • who will clean and service the property
  • when the security deposit will be returned

Is a lease agreement legally binding?

Once signed, a valid written lease agreement is legally binding. It’s a huge responsibility to enter into a lease agreement because the lease period and lease amount is fixed. If either party is unsure of whether the arrangement should be permanent or temporary, it’s recommended that a rental agreement should be entered into instead.


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