What is lease?
A lease is a legal contract between the owner (lessor) of a property and the renter (lessee) for use of that property for an agreed period. It sets out the terms and conditions applicable to the use of that property, including the length of agreement, monetary contributions, rules and regulations etc. A lease agreement may be oral or written but if it extends beyond three years it must be in writing.
Types of Leases
Finance leasing and operating leasing are two of the most common types of leases. Finance leasing involves the tenant paying for the asset in regular payments until ownership is transferred, usually at the end of the lease term. A finance lease is reflected as an off-balance sheet item on the lessee’s balance sheet.
Operating leasing offers the option of flexible operational use of assets with little commitment other than periodic payment of rentals.
Contract hire leases are agreements between two parties specifying that contractual rent be paid over an agreed period in exchange for exclusive use of an asset with no buyout option at maturity.
Difference between lease and rent
A lease is an agreement that typically lasts for multiple years, while a rental agreement usually only covers one month-to-month period. Renters also have fewer rights under a lease than they do with a rental, as the landlord retains more control over activities and property maintenance. Most leases require renters to pay security deposits when signing the contract, which are not refundable at the end of the lease term, whereas in many jurisdictions rent deposits are refundable upon leasing termination.