As a renter, when it comes to finding a place to live in UAE, renting and leasing are two terms that will come up to you a lot.  And as a landlord, whether you handle properties to rent full-time or rent out a single house as a side hustle, you're expected to know it all.   

But what exactly do they imply, and what are some of the significant parallels and differences?   

Leasing agreements and renting agreements are both legally enforceable arrangements. However, each one has a distinct function and purpose.    

In this blog, we discuss the main distinctions between a lease and a rental agreement.   

Although the terms 'rent' and 'lease' are frequently interchanged in the UAE, there is a distinction between the two regarding real estate contracts.   

The Key Difference Between Lease and Rent    

The primary distinction between lease and rent is their term.   

A lease is valid for the duration of time mentioned in the agreement, but a rental agreement covers a short-term period that is not always defined. For example, you and your partner could sign a one-year lease agreement. When moving in with your partner for the first time, you may wish to go for a month-to-month renting agreement because it is more flexible (in the event things don't work out).   

What Is a Lease Agreement?   

Many landlords demand renters sign lease agreements prior to moving into a rental property. In a nutshell, a lease is a contract between a landlord and a tenant that gives a tenant the right to live in a property for a fixed period of time, typically covering a 6- or 12-month renting period. The parties to the lease are bound by a contract between the landlord and the renter.   

Residential leases are written agreements between a landlord and a tenant that spell out the expectations of both parties, including the type of rent, pet laws, and the period of the agreement. A solid, well-thought-out, and well-worded lease contract can assist safeguard both parties best interests, as neither can change the contract without the other's written consent.   

Leasing a property entails renting the property for an established period of time, but does not give the renter any type of ownership rights.   

Leases can be used to cover all sorts of property, such as:   

• Houses   
• Apartments   
• Lands   
• Vehicles   
• Furniture   
• Commercial Real Estate   
• Tools or Equipment   

What Is a Rental Agreement?   

Rental agreements are very similar to lease agreements. The length of the contract is the most significant distinction between lease and rental agreements. A rental agreement, as opposed to a long-term lease agreement, allows occupancy for a shorter period of time—usually 30 days.   

Most rental agreements are "month-to-month," and they automatically renew at the end of each term period (month), unless the tenant or the landlord specifies otherwise. A rental agreement allows both the landlord and the tenant to amend the terms of the agreement at the conclusion of each month (so long as appropriate notice procedures are followed).   

In commercial real estate, the term leasing is more commonly used than the term renting.   

Over 43 million households are in some type of rental scenario, so chances are you're renting a room, a house, or an apartment right now.   

However, are you genuinely renting or leasing your home? Most importantly are you taking the right choice?   

End of Lease   

The expiration date of a lease permits either party to terminate the agreement or extend it for another year (or whatever time frame is defined in the lease or defined again). In real estate, this is commonly done 60 to 90 days before the lease period ends. Renters can either give notice of their intention to leave or declare that they intend to stay. The landlord can notify the tenant of upcoming changes, such as a rent rise (which is usually limited by the lease or by law), which the tenant can accept, negotiate, or reject.   

Unless or until both parties sign a new lease with a new expiration date or one or both parties back out of the month-to-month arrangement, tenants are automatically switched to a "month-to-month" rental agreement when their lease ends. Tenants must normally follow the regulations laid down in the first lease, but the terms are subject to modify on a monthly basis.   

How Do Apartment Leases Work?   

It's important to evaluate how long you're willing to take the apartment when deciding between leasing and renting.   

Are you okay with living in that apartment or house for at least a year? If you aren’t and would rather have something more flexible, perhaps a month-to-month rental agreement is a better fit for you.   

For instance, a college or university student who plans to leave town each summer may not be able to keep a long-term lease and might benefit from the alternative leasing options outlined above.(aka renting). However, if you do decide to lease an apartment, it works in the same way that a house lease does, albeit without the option to buy the apartment unit, building, or land.   

If you want to rent an apartment, you'll almost undoubtedly have to sign a lease agreement.   

Leases and  Rental Agreements Common Items   

Lease and rental arrangements can differ in terms of structure and flexibility. For example, some leases may include a pet policy for the rental unit, while others may include an addendum with additional restrictions or regulations, such as excessive noise or curfew.   

• Names and contact information of tenants occupying the property   
• Landlord contact information    
• Length and type of the tenancy ( this will determine whether the contract is a lease or a rental agreement)    
• Cost of rent, amount of security deposit, and terms of payment    
• Specifics regarding who is responsible for utility payments    
• Additional fees for pets, parking, or any agreed-upon addition    
• Right of entry    
• What constitutes disruptive behaviors and illegal activities    
• This can include a security deposit, which the tenant pays to the landlord to cover damages but receives back at the end of the term.   
• Costs and damage maintenance the owner is liable for, as well as which costs and maintenance the tenant is accountable for.   

Landlords may be compelled to include specific disclosures on their leases or rental agreements, such as unit damages, depending on the state. Always remember to follow your state and federal laws when preparing your lease or rental agreement.   

Tip: When determining the ideal housing scenario for your financial plans, consult with a financial counsellor before signing your rental agreement.   

Pros and Cons of a Lease Agreement vs. a Rental Agreement   

The benefits and drawbacks of each contract fall into a few categories, depending on the type of landlord-tenant relationship you're looking for.   

Let's start with the advantages and disadvantages of a lease:   

PROS OF LEASING:    

✔Structured for the long term. stable occupancy    

✔May provide a more predictable rental income stream    

If stability is important to you, leasing may be the best alternative. Many landlords prefer leases to rental agreements because they are designed for secure, long-term occupation. Keeping a tenant in a property for at least a year might provide a more stable rental income stream and lower turnover costs.   

CONS OF LEASING:    

✖️ Rental cost is set in stone until the end of the agreement    

✖️ May lose out on incremental income if the market value of property increases   

Once a lease agreement is completed, the rental cost is locked in for the duration of the contract. In a hot market with continually rising property values, a set rental rate for 12 months could mean missing out on significant additional income from market increases.  

Now moving forward, let’s examine the advantages and disadvantages of rent:   

PROS OF RENT:    

✔The short term allows for flexibility    

✔Rent may be revised each month    

Because a rental agreement is for a limited period of time, it allows for much greater flexibility in terms of rate hikes. Technically, rent can be increased each month with a rental agreement to keep it in line with the current fair market rent as long as the increase is in compliance with local legislation and the notice terms that regulate the month-to-month rental.   

A rental agreement is appropriate for renters who are unable to commit to a 12-month lease. It could attract a large number of suitable tenants looking for a short-term rental near college campuses or big hospitals, which may be in high demand.   

CONS OF RENT:    

✖️ May deal with turnover more frequently   

✖️ Rental income stream may be more unpredictable   

A tenant looking for a long-term lease may be put off by the flexibility of a month-to-month lease, which may subject them to frequent rent rises or indefinite rental periods. The costs of more frequent tenant turnover, such as advertising, screening, and cleaning, should be considered by landlords. Furthermore, if your rental is in a low-occupancy neighborhood, you may have difficulty maintaining your apartment rented for long periods of time.   

Keynotes and Takeaways:   

A lease is a fantastic option for landlords looking for consistent income, but it might hurt profits if the property value rises during the year.   

A rental agreement may be an appropriate option for landlords seeking flexibility, particularly in areas where tenants change regularly, such as college towns.   

Summary Table   

Definition of Some Frequently Used Technical-Related Terms:   

Lessor   

A lessor is someone who owns something, such as an apartment or a house, and leases it to another person.   

Lessee   

A lessee is someone who has leased something, such as a house or a plot of land.   

Leaseholders    

Leaseholders are tenants of the month-to-month leased property. A leaseholder is someone who is permitted to utilize a property under the conditions of a lease agreement. A leaseholder pays for the right to occupy a property for a determined period of time   

Tenancy Agreement   

A tenancy agreement is a legal contract between the landlord and tenant for the rental of property that determines the rights and duties of each party.   

A tenancy agreement details the responsibilities of a landlord and tenant for renting a property. Both parties are able to define what is expected from each other in the agreement, with explicit clauses about rent, security deposit, utilities, and more.   

Conclusion   

It is critical that you know who your tenant is, whether you want to give a lease or a rental agreement. Thoroughly evaluating your rental applicants may provide you the reassurance that you're putting the right person in the right spot.   

You will find all of your living necessities at Sama UAE, as well as a great offer on both rent and leases.