What is the difference between lease and rent?

As a tenant, it’s easy to land up in a dilemma between leasing and renting properties. When you look out for a property in Kolkata, you may be using these terms interchangeably. However, it pays to understand the difference between lease and rent before signing the agreement. The terms are different and can have an implication on your tenancy.

Rent and lease agreements differ from each other based on the length of tenures. This implies that the monetary implications of the lease and rent agreements would also be different.

 Understanding the concept of rent and lease

A tenant agreement between two parties can either be a license or a rent. The tenancy period largely determines whether it should be a lease of a license agreement. Different laws are applicable for these tenancy categories.

Compared to residential real estate, lease agreements are more common in the commercial segment.

Not all rent agreements qualify as leases. To qualify as a lease, a rent agreement has to fulfill these conditions:

·         As per a lease agreement, the right to make use of the property gets transferred to the tenant from the landlord.

·         Either the agreement has to mention a specific period of occupancy, or it will be considered as perpetuity.

·         The landlord would return a rental income each month as he or she transfers to the right to use the property to the tenant.

·         Besides cash transfer, the two parties may agree to pay in kind, such as crops or any service.

·         A lease contract is generally long, where the landlord lets out the property for a period ranging between 3 years and eternity.  

 Why is leasing more common in the commercial segment?

Commercial property transactions involve a high value. This implies that both the involved parties should be legally protected. So, you would find property leases mostly in the commercial real estate sector. In case you are on the lookout for the best property in kolkata, the owner would insist on obtaining it on lease. The entire process of letting out is more formal in the case of a lease.

However, when you consider letting out of residential properties, the transactions do not involve a high value. For both the landlord and the tenant, the paperwork would be a hassle. Therefore, they tend to skip lease agreements and rely on their instincts while entering the agreement.

What is a rent agreement?

Unlike long-term lease agreements, rent agreements are signed for 11 months under leave and license contracts. Besides, the rent control laws are different for each state. After 11 months, the agreements may be renewed or discontinued. Landlords who adhere to rent control laws while letting out their premises find it difficult to evict tenants or revise rents.

What are the benefits of a rent agreement?

Signing a rent agreement can prove advantageous for both landlords and tenants. Let’s take a look at these benefits from both perspectives.

Benefits for landlords

·         A rent license doesn’t provide an exclusive interest in the property to the tenant, but a lease does.

·         A rent license cannot be transferred or assigned.

·         It is easy to terminate a rent license agreement.

·         A landlord can easily alter the terms and conditions in a license agreement, but not in a lease agreement.

 Benefits for tenants

·         Compared to leases, rent agreements with licenses are designed for short periods.

·         In a license agreement, tenants need not provide long notices to landlords if they want to vacate the premises.

In the residential real estate sector, rent agreements under the leave and licence contract tend to be more common. Let’s understand what this concept is.

What is a leave and license?

A leave and license agreement is a contract where a landlord transfers the right to use the property to the tenant. The Supreme Court has further clarified this clause, stating that an agreement would be considered to be a leave and license in case the owner retains the possession and control of the property while the tenant can use the property for a specific purpose.

 Therefore, a rent agreement becomes a leave and license agreement under these conditions.

·         The license is not assigned or transferred.

·         The contract is completely permissive in nature.

·         The tenant acquires the right to carry out something on the property from the landlord. However, if the landlord doesn’t sign the agreement, the activity would be considered as illegal.

·         The tenant doesn’t have any interest in the property.

In order to avoid legal complexities, landlords enter into agreements with their tenants for 11 months. These agreements, when carried out as a part of the leave and license contract, do not remain valid under the rent control laws. Only when the tenure is one year of longer, these laws would be applicable.

Therefore, both the landlord and the tenant enjoy more freedom with rent agreements under leave and license contracts. They can terminate the license at will. Besides, these contracts do not have a lock-in period imposed on them.

Buying or renting a property in kolkata

Whether you are looking for a property for sale in Kolkata or get one on rent, it pays to consult a reputed broker. The professionals can further guide you on the legalities. Besides, you can find affordable properties by consulting professionals.