In real estate, a lease is a contract for a specific period of time — often 6 or 12 months — after which the contract expires, while rent is the payment made under the terms of the lease. Real estate leases are also commonly known as "rental agreements."
Relationship Between Lease and Rent
In real estate, a lease is the contractual agreement that defines the terms of the use of a property. This includes what is being rented, for how long, and other stipulations that both parties agree to (e.g., whether pets are allowed on the property).
Rent is the periodic payment made to the owner of a property (often called "landlord") for the use of said property, which could be a building, residential space (house, apartment, etc.), commercial space (office, store, warehouse, etc.), or land. In other business cases, rent is the payment or series of payments made to the owner of a property for the use of that property, such as equipment, vehicles, industrial machinery, and so on.
How Long a Lease Lasts
Leases are usually set for a period of 6 or 12 months, but can cover more time or less. The term "rental agreement" is synonymous with "lease."
Because a lease is a contractual agreement, both parties are obligated to abide by it for its duration. Rent must be paid in a timely and consistent manner — usually at the 1st of the month — and often, late payments are penalized as per the lease's terms. On the other hand, the property owner cannot unilaterally end the lease or change the conditions without the tenant's (the rent payer's) agreement.
In real estate, a written offer to enter a lease (renting a house, for example), is binding. For that reason, one should not make multiple written offers as more than one could be accepted. At that point, the person has already entered multiple leases and is required to pay multiple rents.
End of Lease
A lease's expiration date allows either party to end or extend the terms for another year (or whatever time frame is defined in the lease). In real estate, this is usually done about 60 to 90 days before the lease period ends. This means renters can give notice that they are leaving or indicate that they are staying. The landlord can indicate that changes will apply, such as a rent increase (often limited by the lease or by law), which the tenant can either accept, negotiate, or reject.
Leasing vs. Renting Month-to-Month
When a lease expires, tenants are automatically shifted to a "month-to-month" rental agreement unless or until both parties sign a new lease with a new expiration date or one or both parties backs out of the month-to-month agreement. In this scenario, tenants must generally abide by rules established in the initial lease, but terms are subject to change on a monthly basis.
Month-to-month agreements come with major pros and cons for both tenants and property owners. For tenants, month-to-month rental agreements give them the freedom to move whenever is most convenient, without having to worry about transferring or breaking a lease agreement. For property owners, this makes rental income uncertain. To offset this uncertainty, many property owners choose to charge month-to-month tenants a much higher rent rate than those who are on a lease, a fact which makes month-to-month agreements prohibitive for most renters.
In some instances, month-to-month agreements are more common and less likely to be related to expired leases. In cities with transient populations (e.g., Las Vegas), short-term leases are common and are not necessarily connected to higher rent charges.
Subleases and Assignments
Once a lease is signed, the tenant is responsible for making rental payments and maintaining the property. If the need arises for the tenant to temporarily leave the property, he or she can usually sublease (a.k.a., sublet) the property. This means that another person — the sublessee — will live at the property and continue to pay rent on it according to sublessor's — the original tenant's — terms.
Whether a tenant can sublet a property or not may depend on terms already agreed to in the lease; however, most landlords and property management companies will not reject such an arrangement without due cause. It is worth noting that although the person subletting is on the premises, the ultimate responsibility for the rent and the property remain with the tenant who signed the original lease, meaning that subleasing does carry some risk for the sublessor in particular.
An assignment can occur when the tenant leaves a property and another person takes over the lease. Assignments are sometimes more commonly known as a "lease transfers." Landlords are obligated to facilitate the transferring of a lease when a tenant has found someone to take over the lease. Unlike in subletting, an assignment means the lease is amended to transfer the ultimate responsibility for the property from the old tenant (the assignor) to the new tenant (the assignee), without altering the lease terms.