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When starting a new tenancy, there’s more than one option available.

Did you know that there is a difference between a lease vs rental agreement?

It may seem unimportant, but these differences can change the complexion of how a tenancy is carried out.

Below is a synopsis to help you make the right choice.


Firstly, leases are more common between the two options.

A lease allows a tenant to remain in the rental unit for a set period of time. In the majority of cases, a lease is one year in length with an option to renew for another year.

However, some leases can be only six months in length. This usually depends on the need of the landlord and tenant.

With a lease comes greater security – as long as you can pay your rent and abide by the rules you signed to, you can stay.

It’s important to note that a lease cannot be changed once it is signed by both parties.

If something were to come up within the lease duration – for example, the landlord wants to add a clause about smoking in the unit – it cannot be added until the lease itself has expired and a new one is drafted and signed by both parties.

A lease also means that a tenant cannot simply leave without paying their rent due.

If they do so, they have broken the lease and are subject to the penalties contained within the lease or to provincial tenancy laws.

According to the Landlord and Tenant Board of Ontario, for example:

“A tenant and landlord can agree to break a lease. It is best for both parties if this agreement is in writing and is signed by the landlord and the tenant. If the landlord is not willing to break the lease, the tenant has the right to assign the unit to a new tenant with the landlord’s consent.”

Rental Agreements:

Rental agreements are utilized when a landlord and tenant wish to carry out a short-term rental only.

These agreements are generally one month in duration and are renewed every 30 days. A very important difference with rental agreements is that they can be changed frequently – each month, a landlord or tenant can suggest additions or revisions to the agreement.

However, for tenants, rental agreements are not always the most secure option.

Your rent can easily increase each month (so long as the landlord is following rent control provisions) and you can be asked to leave as soon as the agreement has expired.

Unless you know you will only be staying for a month, a rental agreement will not give you peace of mind.

For landlords, rental agreements can be a terrific option.

Here are some benefits for a landlord to rent rather than lease:

Benefit #1

It is more attractive to certain tenants.

Many tenants like travellers, college kids, new divorcées and others, do not want to commit to a fixed-period lease. They’d usually prefer a month-to-month rental agreement.

You will probably attract far more tenants with this type of lease, even though they might stay for much shorter periods.

This is also true for low-income families who might have difficulty finding housing with a fixed-period lease. They can have a place to live without the commitment of staying for any longer than a couple of months.

Benefit #2

It is far easier to remove “problem Tenants”.

With a fixed-period lease, it is very difficult to identify tenants who create problems and destruction and to get them off your property. With a month-to-month rental agreement, you can make adjustments as you see fit, and can cancel the agreement within 30 days. You’ll also be able to minimize the amount of damage caused by tenants. They won’t have as long a time to wreck your property, which is the bane of most landlords’ existences.

Benefit #3

Raise the Rent more frequently

When a tenant signs a 12-month lease, you cannot raise the rent for at least twelve months.

On a month-to-month rental agreement, however, you can raise the rent as often as you wish. Even so, you’d want to raise it in smaller increments to avoid chasing tenants away.

You can also charge more rent to start with because tenants are paying for the month-to-month freedom, and are free to move whenever they wish.

Although I wouldn’t recommend putting your rates too much higher than your fixed-period competitors, you can raise the rent nominally and garner more profit.

Benefit #4


If your rental property is in a college town, a popular vacation spot, or another desirable location for frequent travelers, you’ll stand a better chance of succeeding financially with a month-to-month rental agreement. You’ll have a much higher turn-over rate, but you’ll get more tenants and you’ll be able to charge higher rates.

Although a month-to-month rental agreement does present certain security problems for the landlord, it is a perfectly acceptable way to do business, and can be customized to fit your rental property. You can maximize the benefits by offering both fixed-period leases and month-to-month rental agreements.

Have more questions about rental agreements and leases? You can get some good information from CMHC:

Did you enjoy this article? Find more helpful articles for landlords here.

-The Team