What’s the difference between a lease and a rent?

We look at what a lease agreement is and why it’s not always the same as a rental agreement.

difference between a lease and a rent

Although the terms lease and rent are frequently used interchangeably, leasing a property differs from renting a home. If we go by the strict legal distinction made between the two tenancy arrangements, this is correct. A lease agreement or a rental agreement can be used to establish a tenancy. Rent agreements are distinguished from lease agreements by the length of the tenancy period and the amount of rent paid. As a result, the financial implications of leasing and renting are distinct.

 

The Difference between Leasing and Renting

A rent agreement can be a lease or a licence, and it is a document signed by the tenant and the landlord to formalise the renting process. The length of a tenancy determines whether it can be carried out under a licence or a lease agreement. It’s worth noting that the two arrangements are governed by different laws and, as a result, have different characteristics.

 


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What is the definition of a lease agreement?

Leases are defined in Section 105 of the 1882 Transfer of Property Act According to this Section, a lease is “a transfer of a right to enjoy a property for a specific period of time, express or implied, or in perpetuity, in exchange for a price paid or promised, or of money, a share of crops, service, or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.”

A rent agreement must meet the following criteria to be considered a lease:

o The right to use property must be transferred from the landlord to the tenant.

o This agreement must be for a set period of time or indefinitely.

o In exchange for transferring the right to enjoy his property to the tenant, the landlord must receive a monthly rent. Aside from cash, the two parties can agree that the tenant will pay ‘a share of crops, service, or any other valuable thing.

When a landlord plans to rent out his property for an extended period of time – which could be anywhere from three years to eternity – a lease contract must be signed. A lease deed must be stamped and registered as well. Lease agreements are generally difficult to terminate due to the registration.

 

In commercial leasing, leasing is more common.

Leasing is more common in the commercial real estate segment due to the high value of commercial transactions, which necessitate proper legal protection for both the landlord and the tenant. The entire exercise becomes more formalised in such cases. The same cannot be said for renting in the residential sector, particularly in the low-cost or mid-range property segments, where both the tenant and the landlord frequently want to avoid the hassle of filling out paperwork and rely on their instincts or gut feelings to make tenancy decisions.

 

What is the definition of a lease agreement?

Rent agreements signed for a period of 11 months are classified as leave and licence contracts and are not subject to rent control laws. All lease agreements that are conducted for a period of at least a year are covered by rent control laws, which vary from state to state. Landlords who rent their properties under rent control laws will have a difficult time raising rents or evicting tenants.

Since the Model Tenancy law has been approved by the Union Cabinet, all rent agreements lasting more than 11 months will be governed by the new law’s rules. Before that can happen, states will have to come up with their own version of the model tenancy law or change their existing rental laws.

 

What’s the difference between a lease and a rent?

– Particulars

o Type of contract

o Parties

o Payment

o Maintenance responsibility

o Expiry

o Time period

o Ownership

o Change in contract

 

– Lease

o Lease

o Lessor and lessee

o Monthly

o Lessee

o Expires at the date mentioned

o Long term

o Remains with the lessor

o No change for the period fixed

 

– Rent

o Leave and licence

o Landlord and tenant

o Monthly, quarterly, yearly

o Tenant

o Expires at the date mentioned

o Short term

o Remains with the landlord

o Changes possible

difference between a lease and a rent

What is the difference between a rental agreement and a lease?

The majority of rent agreements does not lease, but rather licence agreements. This is why a tenant should learn about the leave and licence agreements.

 

What is the difference between leave and a licence?

The Indian Easements Act of 1882 defines leaves and licence agreements in Section 52. “Where one person grants to another, or a definite number of other persons, a right to do, or continue to do, in or upon the grantor’s immovable property, something that would be unlawful in the absence of such right, and such right does not amount to an easement or an interest in the property, the right is called a licence,” according to this section.

“If a document gives only a right to use the property in a particular way or under certain terms, while it remains in the possession and control of the owner thereof, it will be a licence,” the Supreme Court said, clarifying the section. The owner of the property retains legal possession of the premises, but the licensee is permitted to use the premises for a specific purpose. His occupation would be illegal if it weren’t for permission. It does not create any estate or interest in the property in his favour.”

o A leave & licence agreement is entirely permissive.

o A licence is not transferable or assignable.

o The landlord gives the tenant the right to do something that is illegal unless a written agreement is signed.

o This right isn’t the same as an easement or a stake in the land.

To avoid legal complications, landlords and tenants commonly enter into rent agreements for a period of 11 months. The rent control laws do not recognise an 11-month rent agreement that is carried out as a leave and licence contract. These laws would only apply if the agreement specified a period of one year or more.

Rent agreements that fall under the category of leave and licence contracts also give landlords and tenants more flexibility. No form of lock-ins imposed in the agreement would be valid, even if the agreement says so because the licence can be terminated at any time.

 

The advantages of a rental agreement

For the benefit of landlords

o A lease, unlike a licence, gives the tenant an exclusive interest in the property.

o It is not possible to assign or transfer a licence.

o It is simple to end a licence agreement.

o In comparison to a lease agreement, it is easier for the landlord to change the terms of a licence agreement.

 

For renters

o In comparison to leases, rent agreements involving licences are for a shorter period of time.

o In a licence agreement, there is no requirement to provide long notice for vacating the premises.

 

Key differences between a lease and a rental agreement

In the residential real estate sector, where the entire process is more informal, rent agreements that work under the leave and licence contract are more common.

 

Agreements on rent in India

To avoid the legal complexities of signing a lease, rent agreements in the residential segment in India are typically signed for a period of 11 months. The main reason for this is that rental agreements lasting less than a year are not required to be registered. A licence is a document that allows tenancy for a period of less than six months and does not require registration.

Leases, on the other hand, are the norm in the commercial sector because they cover longer tenancy periods.

 


 

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Disclaimer: The views of this expressed above are for informational purposes only based on the industry reports & related news stories. Navimumbaihouses.com does not guarantee the accuracy of this article, completeness, or reliability of the information & shall not be held responsible for any action taken based on the published information.
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