In general, rent or lease agreements serve as a vital document when it comes to renting or leasing assets or property. They also come in handy for availing financing services like – lease rental discounting from KredX.
Though rent agreement and lease agreement are quite similar in terms of functioning and components, there are a few distinctions that one must be aware of. To understand the same, individuals must make it a point to find out about each concept in detail.
Additionally, they should weigh in the pros and cons that follow such an agreement, to be well-versed about the distinctions.
Essentially, a rent agreement is a month-on-month agreement between a tenant and an asset owner or landlord. This agreement allows tenants to use an individual’s asset for a specific period and as per their predetermined terms.
Typically, such an agreement gets renewed after an expiry date, unless either of the concerned parties provide a proper notice.
These are among the most significant components of a rent agreement –
Notably, a prominent benefit of a rent agreement is that there is a scope of revising the contract every month. Further, the arrangement is quite flexible and applicable for short terms as well. Asset owners or landlords can make the most of their rental agreement by availing lease rental discounting services from KredX. Typically, such a funding option helps to access funds against future rentals and meet growth-oriented requirements accordingly.
A lease agreement is fundamentally a contract between a lessee and a lessor. Unlike a rental agreement, this one tends to be active for a more extended period, preferably over a year or so.
Such an agreement allows the lessor to use an asset or property owned or managed by the lessee, for a pre-fixed tenure against periodic pay-outs. It must be noted that a lease agreement does not denote ownership of the leased asset or property.
Typically, a lease agreement remains active only for the agreed period and ceases to exist after the expiry date. It means, if a lessor intends to hold on to the asset or property for a longer period than mentioned in the contract, both parties must enter into a new lease agreement.
These are some vital components of a lease agreement –
Since rental agreements are structured for the long term, it tends to provide a more predictable stream of rental income. Furthermore, lessors also have the scope to release tied-up capital in rentals and meet expansion-oriented expenses smoothly. With KredX’s lease rental discounting solution, individuals can access funds against their future rentals, for a tenure of 6 - 18 months.
This table below elucidates some prominent differences between rent agreement and lease agreement -
Rent agreement highlights an arrangement between a tenant and a landlord/asset owner to use a specific asset or property for a predetermined time.
A lease agreement highlights an arrangement between a lessor and a lessee. It details the use of an asset or a property for the long term.
A rent agreement is signed for a short duration.
Typically, a lease agreement stays in action for an extended period.
There are usually two parties involved, namely – landlord/asset owner and tenant.
Generally, a lessor and a lessee are involved in this agreement.
Frequency of pay-out
Rent is paid either on a monthly or quarterly basis.
Lease payments are usually cleared every month.
Change in agreement
Asset owners/landlords can change the terms of the agreement at any time.
Typically, no changes are made to the contract for a specific duration.
The renting agreement does not necessarily follow an accounting standard.
Lease agreements are mostly framed as per accounting standard no. 19.
The maintenance of the asset lies with the tenant.
The maintenance of the asset leased lies with the lessee.
Asset owners and landlords don’t provide any additional offer or terms to the tenant.
In some cases, when the agreement expires, the lessor asks the lessee to purchase an asset.
Individuals can raise capital against lease rental agreements and fund their capital-based needs with much greater convenience by availing KredX’s lease rental discounting services. However, it must be noted that the amount of capital one can access through this funding option depends entirely on eligibility and creditworthiness of the firm.