When an individual wants to rent out their property in Pakistan or a rental house, they probably listen to the terms of a lease agreement and a rental agreement.
Both these terms have different legal implications and specifications for both tenants & property owners.
This guide will cover all the aspects of a rental and lease agreement, their legal implications and the general format of a rental agreement.
A Bit About Lease Agreement
It is a contract & legal agreement between property owners who want to rent out their properties and a tenant (renter). The purpose of this agreement is to smooth the property renting process by following the terms for renting for a specific duration.
A lease agreement is usually for 6 months to one year. In most cases, it can be extended upto 3-5 years.
This agreement outlines the rights and duties of both parties and protects intellectual property.
A Bit About Rent Agreement?
A rental agreement is also a legally binding contract between property owner and tenant for the use of property, but typically on a month-to-month basis.
It also outlines the terms and conditions of the rental, including the involvement of parties, rental duration and amount of rent.
Unlike leases, the rental agreements are often automatically renewed unless terminated by either party.
Similar Key Features of a Lease Agreement & Rent Agreement
A rental and lease agreement generally have the following same features.
1. Parties Involved
Both parties, the landlord (lessor) and tenant (lessee), are involved in the agreement.
2. Property Description
The complete address and specification of the rental property and the details of any appliance or furnishing are also included.
3. Rent Details
Rent details include the amount of rent, payment schedules and due dates of payment.
4. Security Deposit
The amount required as security, conditions for return and any deduction.
5. Maintenance Responsibilities
A clear statement and details about who is responsible for property upkeep and repair.
6. Termination Conditions
The general circumstances under which either party can terminate the lease agreement.
8. Rules & Regulations
Additional rules and regulations relevant to your agreement.
Key Difference Between a Lease Agreement & Rent Agreement
Following are general differences between a rental and a lease agreement.
| Aspects | Rent Agreement | Lease Agreement |
| Duration | This agreement is typically for short-term (e.g., month-to-month). | While the lease agreement is long-term (usually one year or more) |
| Termination | It can be terminated with a short notice of one month. | Its termination usually requires longer notice, upto 30 to 90 days. |
| Renewal | Automatically renews on a monthly basis unless notice is given. | It may require explicit renewal or renegotiation. |
| Legal Formalities | Registration is usually not required in a rental agreement. Regardless, it may vary by province and duration. | This agreement must be re-registered under the Registration Act 1908 if the term exceeds one year or the given duration. |
| Applicable Laws | These agreements are governed by rent laws such as the Punjab Rented Premises Act, 2009. | It follows the same provincial laws but with stricter registration rules. |
| Flexibility | Both parties can make changes to the terms of a rental agreement at the end of each month, subject to proper notice. | Changings are usually not allowed in a lease agreement once it is signed. |
Which is better: a Rent Agreement or a Lease Agreement?
There is no single better agreement, as both lease and rental agreements have their advantages & disadvantages. A lease agreement offers stability & has a fixed rent for a long period.
On the other hand, a rental agreement provides flexibility and is often month-to-month. It also allows changes in rent or terms with notice.
How a Rent Agreement Works in Pakistan?
In Pakistan, both a lease and a rental agreement have their significance. Yet, they have different implications and are often used for varying durations.
Consequently, a rental agreement works more successfully than a lease agreement. The tenant prefers to sign a rental agreement as it offers more flexibility than a lease agreement.
Legal Requirements for Lease vs. Rental Agreements in Pakistan
The legal requirements for a rental agreement in Pakistan include.
1. Stamp Paper & E-Stamping
The rent agreement must be executed on a stamp paper. In Punjab, the physical stamp paper system has been replaced with e-stamping. So, the amount of stamps depends on the amount of annual rent.
2. Registration
Both parties must register at
Rent Registrar
Under the Punjab Rented Premises Act 2009, the rent agreement must be registered with the rent registrar. Hence, both parties need to appear at the registrar’s office with valid identification documents and the necessary original documents.
Police Registration
As per the Punjab information of Temporary Residents Act 2015, the landlord is required to submit tenant details & the rent agreement to the local police station through the Punjab Police Khidmat Markaz.
Lease Agreement Format in Pakistan
The above agreement is a general format of a rental agreement in Pakistan. Generally, the agreement includes terms & conditions and other details like
- The amount of the security deposit.
- Monthly rent amount & due date of payment.
- Who is responsible for paying utility bills, including electricity, water etc?
- Premises for residing like the property is for residential use only & pets are not allowed.
- The tenant is responsible for maintaining the damages in the owner’s house.
- Either party can terminate the agreement under certain conditions.
- Notice of 30 days is given before leaving the property, in the case of a lease agreement, a notice of 30 to 60 days is allowed.
Best Practices for Tenants & Landlords
Here are some practices for a successful agreement between landlords and tenants.
For Tenants
- Ensure the landlord has ownership of the property.
- Read and comprehend all the terms and conditions before signing the agreement.
- Always keep the recipient or bank statements as proof of rent payments.
For Owners
- Always keep copies of all the agreements.
- Regularly inspect the property to ensure its maintenance.
- Provide the tenants with proper notice while entering the property.
Final Thoughts
It is important to understand the general differences between a rental and a lease agreement for a smooth rental g process of a property. The similarities between both terms will confuse the individuals to make a smart decision.
Yet, it is advisable to read the terms and conditions before signing an agreement. This guide will help you to make the best choice and outcome after renting a property.
Besides, the tenants can easily distinguish between both these agreements and choose the one that suits their needs.
