Lease vs Rent

Difference Between Lease and Rent

Lease is a type of agreement where lessor gives possession of its assets to lessee for predetermined period in lieu of periodic payments where maintenance of such is the responsibility of lessee whereas Rent is an arrangement where the possession is transferred by asset owner or landlord to its tenant for periodic payments where landlord can change the terms subsequently and it is generally for short term.

On the surface, lease and rent seem similar, but there is a major difference between the two of them.

  • When an asset is given on a lease; the responsibility of maintenance lies on the lessee. That means when a business takes an asset on a lease, the responsibility of maintenance lies in the business.
  • On the other hand, when an asset is rented; the responsibility of maintenance lies on the person who rents the asset or the property.
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Without any ado, let’s get started.

Lease vs Rent Infographics

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Key Differences

Lease vs Rent Comparative Table

Basis for DifferencesLeaseRent
1. MeaningThe lease is entering into a contract with the lesseeLesseeA Lessee, also called a Tenant, is an individual (or entity) who rents the land or property (generally immovable) from a lessor (property owner) under a legal lease agreement. read more for a long period to use an asset/property.Rent is entering into an agreement with the tenant for a certain period to use an asset/property.
2. Term Usually, a leasing contract is signed for the long term.The rental agreement is signed for the short term.
3. Accounting standards Leasing contracts are based on accounting standard 19 (AS-19).There’s no particular accounting standard that is followed in renting agreement.
4. Parties Lessor and lessee.Landlord and tenant.
5. Consideration consideredThe monthly installments are paid for the lease.Rent is paid monthly/quarterly for using the property/asset.
6. MaintenanceIn leasing, the responsibility of maintenance of the asset lies on the lessee.In renting, the responsibility of maintenance of the asset lies on the tenant.
7. Change in contract/agreementOnce the contract is signed, there’s no change in the contract for a fixed period of time.The landlord can change the agreement anytime s/he chooses.
8. Offer at expiryOnce the term is over, the lessee is asked to purchase the asset/property.There is no such offer given to the tenant by the landlord.

Conclusion

Both are different, but to a layman, they stand similar. That’s why it is important to go deep into the concept and understand. Even if the major difference between leasing and renting is who needs to do the maintenance and servicing, there are other differences too.

And even if two parties are involved in the contract/agreement, the roles of each party are different. For example, in a leasing contract, both parties have equal rights. But in renting agreement, the landlord has more power than the tenant though both can decide to go out of agreement whenever they want.

Lease vs Rent Video

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This has been a guide to Lease vs Rent. Here we discuss the top 8 differences between them along with infographics and comparison table. You may also have a look at the following articles for gaining further knowledge in accounting –

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Comments

  1. Nujir Danladi Damba says

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