What is the difference between leasing and renting?

The main difference between leasing and rental is that leasing is a contractual arrangement where the lessee pays the lessor a fixed periodic rate of return for the use of an asset, while rental is an arrangement where a short-term recurring payment is made at intervals for the Temporary use is a property, good or service owned by the owner.

We often use the terms rent and rent interchangeably, thinking that they can mean almost the same thing. But in the real estate world, they are not.

Key areas covered

1. What is rent - definition, characteristics 2. What is rent - definition, characteristics 3. Similarities between rent and rent - overview of common characteristics 4. Difference between rent and rent - comparison of the main differences

key terms

Rent rent Difference Between Leasing and Rent - Comparative Summary

What is leasing?

Leasing is an agreement between two parties that allows one to use the other's property within a specified period of time and for a fixed payment. In rental agreements, the landlord designates the owner of the property who rents out his property. And the tenant refers to the one who holds the lease of a property. A lease contains the specific time frame for how long a lessee would use a particular property or asset. After the contract expires, the contract automatically changes to a monthly rental contract. Unless the landlord and tenant decide to sign a new lease.

Leasing contract

Since a rental contract has fixed terms, neither party can make changes to the contract until the end of the contract. In addition, in a scenario where the lessor or the lessee breaches the lease, sanctions may be imposed on both parties.

What is rent?

Rent is a short term agreement between the landlord and the tenant where the landlord is the owner while the tenant is the one who uses and pays for a property. A rental contract usually only lasts one month and is automatically renewed after each payment period.

Rent vs. Rent

If we compare rent and lease, rent has a more flexible and dynamic arrangement. The landlord can increase the rental price and change the contract, but with prior notice to the tenant.

Similarities Between Leasing and Rent

  1. Leasing and rental refer to an asset that belongs to another person or company.
  2. The nomenclature in rental and lease agreements, especially the way we refer to the two parties: landlord and tenant, landlord and tenant, varies only in relation to, but has the same contextual meaning.
  3. A deposit is common for both leasing and rental contracts.
  4. Maintenance is a common factor in both leasing and rental. Preserving the property and maintaining the property is the responsibility of both the tenant and the tenant.

Difference between leasing and renting

definition

Leasing is an arrangement in which the lessee pays the lessor a fixed periodic rate of return for the use of an asset, while rental is an arrangement in which a short-term recurring payment is made at intervals for the temporary use of a good, service, or property through the property owner.

Timeframe

Leasing is usually a long term contract while rental is short term.

Contract amendment

Changes are not allowed within a rental agreement, while changes are possible within rental agreements.

Payment agreement

The lease has more defined and more solid terms of payment than a lease that is periodic and can be changed.

contract extension

When a lease expires and both parties want to extend the term for a further period, they can create a new lease. In the case of rent, however, the contract is automatically renewed until both the landlord and the tenant decide to terminate the contract.

Purchase option

After the lease has expired, the tenant has the option of either extending the contract or purchasing it at a significantly lower value. There is no such rental offer. After the end of the rental contract, the tenant only has the option of extending the contract or returning the property to the owner.

diploma

In short, the main difference between lease and rental is that a lease is a usually fixed periodic return by a tenant or owner of a property to the owner for possession and use. However, rent is a payment that one person makes at intervals for the use of an asset or property owned by another person. There is a fine line between renting and renting. For those planning to rent a property, good or service, it is important to understand the context of leasing and renting before signing a contract.

Reference:

1. Chen, James. " Leasing definition ". Investopedia, May 19, 2021. 2. “ Residential Leases.” Consumer Affairs Victoria, May 6, 2021.

Image courtesy:

1. " Residential rental agreement with pen " (CC BY 2.0) via Rental Realities2. " For rent " by Kurayba (CC BY-SA 2.0) via Flickr

About the author: Anuradha

Anuradha holds a BA in English, French and Translation Studies. She is currently studying English literature in a second language context in the master’s course. Her areas of interest include art and literature, language and education, nature and animals, cultures and civilizations, food and fashion.