DIFFERENCE BETWEEN LEASE AND RENT

Lease

The lease has been defined as a contractual agreement between two parties, the lessor and the lessee whereby the lessor buys the asset and grants the lessee, the right to use the asset over a specified period, against periodical lease rentals. Lease rentals work as a consideration for the use of the asset that belongs to another party. The agreement in which the terms and conditions of the lease are defined is known as Lease Deed. The different types of lease are given as under:

• Finance Lease
• Operating Lease
• Sale and Lease Back
• Direct Lease
• Open-ended lease
• Close end lease
• Single investor lease
• Leveraged lease
• Domestic Lease
• International Lease

The leasing of land, building and livestock has been very common since early centuries. Although, the concept of leasing industrial equipment has emerged recently.

Rent

Letting the property at rent, to another person for a short term is known as Renting. The term of the rent goes on extending, month to month until the parties mutually decide to end up the agreement. Usually, the term of the rent is less than a year. Rental Agreement is an agreement in which the conditions of rent are defined. The agreement may either be oral or written.

Landlord and Tenant are the two parties to renting. The landlord has the right to raise the rent or modify the terms of the agreement, by giving prior notice to the tenant, in written form. Such an arrangement is appropriate for the tenant when the asset is required for a limited period only as the renting cost is high. So, the company can hire the asset on rent only when it is required.

Key Differences Between Lease and Rent

1. Leasing is defined as a contract between lessor and lessee whereby the lessor buys the asset and lets the lessee use the asset for a particular period. Renting is to allow the other party to occupy or use the asset for a short time, in return for a fixed payment.
2. Accounting Standard – 19 deals with leasing whereas there is no specific standard issued for renting.
3. The time duration for leasing is long, whereas rent is for the short term.
4. There are two parties in a lease agreement, i.e. lessor and lessee. Conversely, the landlord and tenant are the parties in case of renting.
5. The lessee pays lease rentals to the lessor while the tenant pays rent to the landlord.
6. The expenses for repairs and maintenance is borne by the lessee when there is a finance lease, but in the case of operating lease, such expenses are borne by the lessor. On the other hand, the landlord bears the cost of repairs and maintenance of the asset.
7. The terms and conditions of the lease cannot be changed until it ends. As opposed to renting, the landlord can change the terms and conditions of the rental agreement but before giving prior notice to the tenant.
8. The rental agreement is renewed automatically, but this is not so, in the case of a lease.
9. At the end of the lease, the lessee gets the option to buy the asset at a residual price. However, this option is not available in the case of rent.

Point Wise Difference between Lease & Rent