The Difference Between Leasing and Renting Luxury Properties
Leasing and renting are two terms that often get interchanged with each other, especially where it comes to homes. There are actually some very significant differences between the two though.
Key Differences Between Renting and Leasing
A rental agreement is signed for a shorter period of time and can be as short as month to month
Lease agreements are generally for long periods of time of about 1 to 3 years, though some areas do have monthly leasing terms.
- Accounting Standards
There is no general accounting standard for a rental agreement
Leasing contracts are based on the accounting standard 19 (AS-19)
- Contractual Parties
Renting parties are referred to as the landlord (property owner) and the tenant (person living on the property)
Leasing parties are referred to as the lessor (property owner) and the lessee (person living on the property) though when leasing real estate the term renter is sometimes utilized
- Maintenance Responsibilities
Rental maintenance is the responsibility of the property owner, or the landlord to ensure the property is kept in a livable condition according to rental laws
Leased property maintenance most often falls under the responsibility of the lessee living on the property unless otherwise stated in the lease
- Changes in Contract
Once the rental agreement is signed the contract states that the landlord has the right to change the agreement at any time that they choose within lawful measures
Once the lease contract is signed no changes can be made for a specified amount of time.
- Offer at Contract End
When the rental agreement is over there is no offer given to the tenant
At the end of the lease term, the lessee has the ability to purchase the property. A lease option gives the lessee the right to purchase but does not obligate them to purchase the property. A lease-purchase contract can legally bind a lessee to purchase the home at the end of the contract.
- Monthly Payments
In a rental agreement, all monthly rent payments go straight to the landlord
In a lease agreement, a portion of the monthly lease payments can be put towards the purchase of the home at the end of the lease term if agreed upon in the lease contract by both parties.
These differences of course are just the most common generic differences between lease contracts and rental agreements and specific local laws should be looked into before deciding to lease a luxury property. It is best to seek the advice of an experienced local realtor with leasing experience.
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