What is the difference between renting and leasing a property?
Although the terms ‘renting’ and ‘leasing’ are often used interchangeably in Australia by organisations like the Real Estate Institute of Australia, there is a distinction between the two when it comes to property agreements.
In short, a lease is a contract to grant someone the use of an asset, like a house or apartment, for a specified period of time, typically in exchange for regular payments. Renting involves a tenant periodically paying a property owner (often referred to as a landlord) money to live in a house or apartment.
The two are often seen as two sides of the same coin, in that a tenant rents a property that a landlord has agreed to put up for lease.
The term renting is less common in commercial property, where the term leasing is more often used. However, the periodic payments paid by the tenant in these situations can still be referred to as rent.
How do residential property leases work?
The laws can differ from state to state, but in general, short-term contracts for a fixed period of time are the most common type of lease or rental agreement in Australia. Terms of six or 12 months are the most common, though longer and shorter lease periods may also be available in some cases – most states do not set a limit on the length of tenancy agreements.
Some properties are rented on a periodic basis, meaning the lease can be ended at any time, albeit with a legally required notice period. Properties may revert to a periodic lease once a fixed term lease is completed, if the landlord and tenant do not sign a new agreement.
Rent is usually paid at fixed intervals, such as every fortnight, and paid either to the landlord themselves or via a property manager or real estate agent. If a tenant fails to pay rent, they may be issued with a breach notice and ultimately evicted.
When leasing a residential property, a landlord generally agrees to provide a home that is safe and habitable, and to provide repairs when things go wrong – such as when the hot water machine breaks down.
Likewise, landlords and property managers will typically collect a security deposit, known as bond, from the tenant at the start of the lease. This is normally the equivalent of around four to six weeks’ rent and is intended to cover the cost of any damage to the property during the lease. If there is no damage, the tenant will receive this money back when they vacate the property.
A tenancy agreement may also include other conditions, for instance some may state that no pets are allowed on the property.
Do rental payments change during a lease?
During most six or 12-month fixed-term leases, rent cannot be increased unless the landlord and tenant have already agreed to an increase in the tenancy agreement. Even then, there may be restrictions around how often rent can be increased. For example, in Queensland, a landlord must wait until at least six months after the start of a tenancy, or the previous increase, before lifting the rent. They are also required to give the tenant two months’ notice of the increase.
However, if the landlord and tenant have agreed to a longer-term lease, there may be scope for additional rental increases. In NSW, for instance, if a fixed-term agreement is longer than two years, the landlord may increase rent at any time with 60 days’ notice, but can only do so once a year.
It is generally easier for a landlord to increase rent during a periodic lease. Typically, the only requirement is that they give the tenant a legally required period of notice, such as four weeks or 60 days depending on which jurisdiction they are in, before making the change.
Evan Schwarten is a journalist with more than 15 years’ experience covering economics, business and politics.
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