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Lease-vs-Rent

 

Lease Vs Rent

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Lease-

In lease has a fixed term, such as six months or a year, there are two party’s lessor or lessee, Lessee has agreed to pay lessor, a fixed amount, for a fixed period, under certain conditions, mentioned in the agreement called leased agreement. Neither lessee or lessor can change any terms of the agreement until the lease expires. A lessee can’t vacate the property without breaking their lease, in which case they can be held liable for the rest of the rent due under the lease or can be required to find someone else to take over the lease.

 
Rent-

In Rent, there are two parties called landlord or tenant, tenant has agreed to pay rent to landlord, a fixed amount, for a fixed period, under certain conditions mutually agreed in the agreement called rent agreement. The tenant and landlord both have the right to vacate the property any time after giving a notice of a specified time mentioned in the rent agreement i.e. may be 1 month or 2 months. The landlord can change the rent agreement any time with the mutual consent.

 

Difference chart between Lease and Rent –

Particulars

LEASE

RENT

Meaning

Under Lease, lessor give permit to lessee, to use the asset belongs to him after paying a fixed amount of lease, for a certain period, is known as Leasing.

Under rent agreement, landlord give property to tenant, after paying a monthly rent for a short period is known as rented.

Accounting Standard

Leasing contacts are based on AS – 19

There is no specific Accounting Standard

Period

Usually leasing contact is signed for long Term

Rental agreement is signed for short Term

Automatically renewed

When the lease period expires, that can’t be further automatically renewed

When the rent agreement period expires, that can be automatically renewed

Parties

Lessor and Lessee

Landlord and Tenant

Further Rented

Lease may be sub lease between old lessee or new lessee

Rent may not be sub-let between old tenant or new tenant

Consideration

The lease rent paid on monthly basis

The rent paid on monthly/quarterly basis

Repairs and Maintenance

Depends upon the type of lease

In rental agreement property is repaired by the Landlord

Modifications

There will be no change in the leased agreement, when it is signed for a fixed period of time.

The rental agreement can be modified any time by the landlord after a mutual consent.

Offer to buy

At the end of the lease term, the lessee gets an offer to buy the leased asset by paying a residual amount.

There is no such offer.

Notice period to vacate property

There is no provision of short notice period. Lease period is for long time.

There is notice period may be 1 month, 2 months or maximum 3 months (As agreement says).


Conclusion-

There is not major difference between the above two, the option to choose between leasing and renting is very difficult, it wholly depends upon the requirement of the asset. If the asset is required by the company throughout the year and so on, then it would be better to go for lease, or if there is no such requirement, then the company may opt for renting.




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