Lease vs Rent
Every industry has its specific terminology that is used to express the mode of business operability.
In real estate too, many terms are used by people to define what business activities they have performed.
Lease and Rent are the two most common words which are used in this industry. But many people muddle their meaning and treat them the same.
Lease refers to the contractual agreement between two parties where Party A allows Party B to use their property for a specific period with specific terms & conditions. Here party A is called Lessor and party B is called Lessee.
Rent is a sub-set of Lease only for a short period and involves a regular monthly payment. In renting also, party A allows the party B to use their property.
Here Party A is called a landlord and Party B is called the tenant. It can also be defined as the payment mode.
The key difference between Lease and Rent lies in the fact that the former is for a longer duration with an authenticated contractual legal agreement, whereas in Renting, the period of the occupancy is less with limited terms & conditions.
Comparison Table Between Lease and Rent (in Tabular Form)
|Parameter of Comparison||Lease||Rent|
|1. Definition||Lease means two parties mutually agree and get into the legal contractual agreement to which both are obligated to abide by for letting and using the particular property with specific terms & conditions.||Rent refers to the mode of payment that is either done under Lease or under a small rental agreement between two parties i.e. Landlord and Tenant for using a property for a small period.|
|2. Duration||For a longer period ranging from 1 year to 10 years (or even more depending upon the property type).||For a smaller period ranging from 6 months to 11 months.|
|3. Terms & conditions||Rigid, can’t be changed before the expiration of the agreement.||Flexible can be changed before the expiration of the agreement.|
|4. Naming Convention||Party A whom the property belongs to is called Lessor and Party B who takes the property for use is called Lessee.||Party A whom the property belongs to is called Landlord and Party B who takes the property for use is called Tenant.|
|5. Extension of Agreement||No, a new legal agreement will be required.||Yes, can be extended with the same terms & conditions.|
What is Lease?
Lease refers to the legal contractual agreement between two parties known as Lessor and Lessee. Here Lessor allows the lessee to use his/her property for a specific time and receive lease rental in exchange for that.
It is a formal legal document with specific terms and conditions that both Lessor and Lessee are obligated to abide by else it will have a negative impact.
It is generally done for a longer period i.e. from 1 to 10 years.
This agreement stipulates certain duties concerning the usage of the property to Lessee.
The lease gives the right or allow the lessee to use of an asset for personal or commercial purposes as described in terms & conditions, and guarantees the Lessor, the property owner, to receive the regular payments as rentals for a specified period in exchange of the property use.
Terms & conditions of the Lease are rigid that can’t be changed for the specified period, and if any party does so then they need to face the legal consequences.
Intimation of extension of the agreement is done 60-90 days before the expiration of the lease agreement.
What is Rent?
Rent is a sub-set of Lease. It is also a contractual agreement between two parties known as Landlord and Tenant but with limited legal obligations.
Here Landlord, the property owner, allows the Tenant to use his/her property for a smaller period in exchange for a certain amount every month, which is called a Rent.
Time duration in agreement range from 6 months to 11 months in this case.
Terms & conditions are flexible and are only defined in terms of property use. If any parties do not oblige to the specified terms & conditions, then the first step to resolving such issue is the mutual talk and if this fails then only legal action is initiated.
Tenant is responsible for maintaining the property. Intimation of extension of the agreement is done 30 days before the expiration of the rental agreement.
Main Differences Between Lease and Rent
Any legal contractual agreement comes with certain responsibilities to both parties, where they need to abide by them.
Lease and Rent are essential characters in the real estate world, where both define how the business will be conducted or operated.
Both, Lease and Rent, have their own characteristics and applications, thus it is important to understand the difference between them.
- Lease a proper legal contractual agreement between Lessor and Lessee, where Lessor allows the Lessee to use his/her property for a longer duration, whereas in renting the landlord, owner of the property, allows the tenant to use the property for a smaller duration.
- The lease is done for at least 1 to 10 years, whereas renting is done for 6 months to 11 months.
- Terms & conditions are rigid in Lease and can’t be modified for the period of the agreement, whereas terms & conditions are flexible in Renting.
- A rental agreement can be renewed with mutual understanding but in case of Lease again new contractual agreement needs to be made between the involved parties.
- In the lease, the maintenance of the property is done by the Lessor or owner of the property, whereas in Renting, the maintenance is the responsibility of the tenant i.e. who uses or occupies the property.
Frequently Asked Questions (FAQ) About Lease and Rent
- Is leasing better than renting?
If you do not have plans to purchase your own property or house in the coming future, then you can go for leasing as it is done only for medium and long periods of lock-in.
While on the other hand, renting is a short term phenomenon.
The monthly rent needs to be given in renting but is not the case in the leasing process.
- What does it mean to lease a house?
To lease a house means that you have taken the partial ownership of the house from the main landlord by giving him the required amount.
Now for the lease period, that is the agreed duration of the lease, you are the owner of that house. Now you have to, look after the maintenance and other things related to the house.
- Can you rent without a lease?
Yes, we can rent a property without a lease. If this is done than the tenant will be living as a tenant of will. He has the right to leave the house in between the period or at any time he desires as no written pact has been made.
In such a case, both the owner and the tenant are free to do what they want in legal terms and are not in boundation of each other.
- What are the disadvantages of leasing?
If you are taking something on lease for a long period of time, then there are many disadvantages.
Some of them are: As the assets which you have taken on lease is continuously depreciating, thus it will result in costing you more than the scene if you would have taken a loan.
Also, limited tax benefits, debt, documentation are some other disadvantages.
- How long does a lease last?
The lease is a medium to long term phenomenon unlike renting which goes on monthly basis. The lease can start from a duration of only 6 months and can go up to a duration of 30 years.
A notice has to be given to the tenant 60 days before the expiration of the lease notifying him that the lease is going to be expired in the coming two months.
- Is it illegal to pay rent without a lease?
No, it is not illegal to pay rent without a lease. If there is no lease present, but you have the permission of the landlord to stay in the property, then you are a tenant at will.
You can pay the rent on a monthly basis to the landlord and stay there till the time you both agree without any dispute.
- Why Leasing a car is smart?
Leasing a for medium to long duration has many advantages.
Some of them include that the monthly lease payment which the person is doing includes the depreciation and maintenance amount at the present condition only and not the future one.
Thus, the payment is lower than the payment if you were to buy a car. Because of this reasons luxury cars are taken on lease more.
Property is the biggest and critical asset that a person buys with their hard-earned money and is considered as a most prominent investment.
The property owner wants their property to remain maintained as well as lucrative.
Lease and Rent are two such options that allow the property owner to get returns on their investments.
But getting the right Lessee or Tenant is very difficult who maintains the property the same as Lessor or Landlord can.
Unfortunately, if Lessee or Tenant is not good then it can turn the whole scenario into a more expensive adventure for Lessor or Landlord.
Thus, while agreeing to Lease or Rent, it’s critical that both the parties clearly define their needs and expectations so that both remain at a win-win situation.
And to do so, one must understand the difference between Lease and Rent.
Word Cloud for Difference Between Lease and Rent
The following is a collection of the most used terms in this article on Lease and Rent. This should help in recalling related terms as used in this article at a later stage for you.