Leasing vs Renting a property: A Complete Guide for both Tenants and owners.

Leasing vs Renting a property: A Complete Guide for both Tenants and owners.

The Lease is an agreement between two parties in which one party permits the other party to use an asset for a defined period of time getting a lump sum amount as a one-time refundable amount, while Renting is a relatively short-term agreement between a tenant and landlord, in which the tenant is liable to pay monthly rent for the use of an asset owned by the landlord. The line of distinction amongst these two terms is very thin and blurred, often causing people to get confused. This article examines the two terms and provides insights on how the two terms are different and their utilities.

Leases

Pros:

  • Landlords have the comfort that renters can’t leave the property at short notice without fulfilling the terms of the lease. Often landlords include a clause that makes the renter responsible for finding someone to take over the lease if he or she needs to move.
  • No need to worry about giving monthly rent
  • if I have 8 lakhs in savings account it ‘ll get interest around 6000/ to 6500/ but by 8 lakhs lease amount the tenant can get Rs.10000-12000/ rent worth property
  • If land lord wants to buy a property worth Rs.20lakh but he have 20lakh then he will let out the property for lease and get remaining money as lease then settle the seller if present seller accept.
  • For land lord : Really do need a huge amount initially (when let out premises)then you go with Lease option else rent is the best option
  • For Tenant: Do you have adequate money in savings (idle in bank account) then Lease is the best option

Cons:

  • The terms of the contract cannot be changed before expiry without the consent of both parties and often landlords.
  • The fixed contract means the rent is fixed and often not adjusted according to the market condition and although it makes things stable, landlords often miss out in case rental prices rise in the economy.
  • Some assets become outdated or depreciate rapidly within 1 or 2 years, and a lease could leave you holding these useless assets for 5 or 10 year terms.

benefits of a lease

Warning: when you want to go to lease property then the tenant should be take an EC for that property before enter any financial commitment with Landlord .In the EC they have to find that is there any Mortgage or Home loan is pending on that property, if it is there then the tenant have to avoid that property for Lease. In many cases landlords bought property by Loan or mortgaged after bought the property, when they not able to repay the loan(seizing stage),that time they plan to lease out that property and abscond. So the financial institution (Banks) take legal action against the landlord and his/her property but in the property possession is with the Lease tenant. Not all Lease property owners doing like this but some number of property owners doing like this. So better to avoid lease properties if it’s a Apartment or commercial portion.
Leases are suitable for landlords who want to “lock in” a tenant for a set period of time. If you have a mortgage payment to meet, for instance, having a locked tenant for the next year can help you budget your expenses. Most tenants are often familiar with long-term leases and will not generally have a problem committing.

Renting

Pros:

  • For tenants, month-to-month rental agreements give them the freedom to move whenever is most convenient, without having to worry about transferring or breaking a lease agreement.
  • For landlords, a rental agreement typically renews after 11months period has elapsed, enabling them to change the agreement and demand more rent if the market rate of rents rises. They also have the freedom to ask the tenant to vacate if required.
  • Always better for Tenants and Landlords

Cons

  • For property owners, rental income becomes uncertain because the tenant can vacate on short notice.
  • To offset this uncertainty, many landlords choose to charge month-to-month tenants a much higher rent rate than those who are on a lease, which makes month-to-month agreements more prohibitive for most renters.

signing a leaseRental agreements are useful if a landlord is having a problem attracting new tenants, or if your property is in an area that caters to students or professionals who move around often.

The choice between leasing and renting is very difficult, but ultimately the decision to lease or rent depends on your industry and by analysing the requirement of the asset in question. If the asset is required by the company throughout the year and so on, then it would be better to go for lease. However, if there is no such requirement, then the company may opt for renting.

Advice from DO: If you go for a lease as tenant then you’ll register the Lease deed in consent Register office. It’s always safe for you money.

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