The main difference between lease and rent is that lease gives the users an option to create a home or setup a business on the property of other for longer period of time while rent give the tenants option to live or use the place or property of someone on short period of time or on temporary basis.
According to Law of Contract and International Accounting Standard 19, lease is a form of contractual agreement between two parties; lessor and lessee, where one party lessee pays the fixed price to the lessor for the use of an asset either movable or immovable. The common assets that are leased are buildings, land, business equipment, industrial assets, etc. Generally lease is made for the lands and buildings. In the lease agreement, lessor remains the real owner of the property while the lessee only gets the rights to use the assets in return of making regular rental payments. As compared to the rental payments in case of rental agreement, lease payments generally involved the periodic payments in form of quarterly, semiannually or annually. Some common types of lease are fixed term lease or lease for years, periodic lease, lease at will, leas and sufferance. Lease agreements are governed by the law and policies of the jurisdiction. However, from financial perspective, like in case of finance lease and operating lease, lease matters are governed by the International Accounting Standard 19. Most of the lease agreement gives the lessee offer to buy option in the end of the lease. In most of the countries, lease agreement is covered in the civil law jurisdictions.
Rent that is also known as letting or hiring an assent, stands for a contractual agreement where one party pays the other for the temporary use of product, good or service owned by that other person. Rent agreement can be in any form either implied, explicit, or written contract or rental agreement that involved specifying the terms of the rental that are managed and regulated by the law of contract. The common examples of rent or letting out parking space, real estate for the purpose of housing tenure, storage space, portion of properties for business, agriculture land or any other movable or immovable property to government or any other institute. The term rental agreement is a wider term that is often use to describe a particular periodic lease agreement internationally and in some states of the US. Rent comes under the jurisdiction of common law and it has no relation with civil law jurisdictions. Unlike lease that mostly covers the immovable properties, rent covers both moveable and immovable properties. Any property or product is generally rented for a shorter period of time, moreover, it doesn’t grant the offer to buy option to the tenant in the end of rental agreement. Unlike, rental costs are always expensed on the statement of comprehensive income for both tax and accounting purposes.
- In case of rent, agreement is automatically renewed and payment becomes due unless cancelled by either tenant or owner. In lease, rent agreement is automatically terminate after the end of prescribed time period.
- In the case of rent, the landlord or property owner can request for increase or decrease the rental price or changes in policy but in lease agreement, the lessor can’t seek the same without the consent of lessee.
- In the rental cases, notice period is served by either owner or tenant when either party would like to end the agreement while it is not common in the case of lease as it is agreed for a specified time.
- The loses in case of breach of rental agreement or less as compared to breach of lease agreement. The main loss is the amount submitted in advance by the party and property is vacated many months before the total months or duration period expires.
- In some areas, oral rental agreements are permissible but not suggested. However, lease agreement will also be in written format and properly documented.
- Lease agreement gives the party a right of ownership or buys option in the end of the lease agreement. The rent agreement doesn’t give any such offer to buy option in the end of rental agreement.
- Lease agreements are for longer period of time while rental agreements are for relatively shorter period of time.
- Lease has different aspect form accounting and taxation perspective while rent has no such classification.
- Lease can be made for both movable and immovable property but generally it is made for immovable property while rental agreements are made for both movable and immovable properties.
- In most of the countries, lease agreement is covered in the civil law jurisdictions. Rent agreements on the other hand are covered under the common law jurisdiction.