What Are the Advantages and Disadvantages of Leases and Rental Agreements?

There are advantages and drawbacks to each type of agreement.

The main advantage to a lease agreement is stability. As a landlord, you have a legally binding document that assures you will have rental income for a designated period of time. In the event that your tenant needs to move before the end of the lease, they will still be liable for the rent throughout the rest of the lease term unless another tenant can be found to take over that remaining period. Landlords often prefer signing long term leases to reduce the turnover costs and avoid vacancies.

The disadvantage of a lease is that it doesn’t provide as much flexibility as a rental agreement. You cannot suddenly ask your tenant to vacate the premises mid-lease, nor can you raise the rent until the lease has been terminated.

In contrast, a rental agreement provides more flexibility. With sufficient notice, you can change the terms of the rental agreement or dissolve it entirely if you want to move into the property. However, with this flexibility comes uncertainty. You are not guaranteed to have a tenant stay long term, which can lead to higher turnover and vacancy rates.

In short, rental agreements are better for flexibility, while long term leases are better for stability.