When you get to a point in life where you can afford to expand your business, you would think of either renting or leasing a commercial establishment/space as a base of operation for your budding venture. It may cause some dilemma as you go through the process; however, before jumping into any major decisions, consider your options first.
What is Renting & Leasing?
Renting is when you plan to use the commercial space for a short-term period. It is an agreement where you are merely using the property, and the "Rent" or payment is on a bi-monthly basis. The landlord can change the agreement as they see fit as long as it is within the state's rules. A standard rental agreement is valid on a month-to-month basis.
Leasing is when you enter into a legally binding contract to use the commercial space for a long-term duration. The contract could last for 12 months and may extend if there is a provision. The agreement is amendable if both parties agree to change the terms and conditions. The landlord cannot change it as they see fit.
Here are some facts that might interest you about Renting & Leasing:
- The Rental Agreement has two parties; the landlord and the tenant, while the Lease Contract has lessor and lessee.
- Renting is done for a short period, emphasizing every month, while Leasing is done for a fixed period, commonly for the medium to long term.
- Renting agreements can be changed at any time while Leasing contracts are predetermined and must be mutually accepted.
- Renting is done chiefly for properties or lands, while Leasing is usually for assets and or equipment.
- Rent is taking property for a monthly fee. On the other hand, when a business does not have enough capital and at the same time wants to use the asset but does not want to pay for it, a Lease is taken.
- There is an accounting done when you Lease a property, while there is no accounting done for when you Rent.
- In Renting, the landlord maintains the maintenance and servicing even if the tenant takes the property on Rent, while the opposite is true when you Lease.
- Once the agreement is over, the tenant usually moves on. On the other hand, there might be an offer given to the lessee once the contract expires to purchase the asset/property.
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We all know that the terminologies can get confusing, but as you can see, when you dig down a little bit, they are all similar. In layman's terms, Renting and Leasing are almost the same. Who gets to maintain and for how long the period of stay will be, are the only differences.
We hope we gave you something valuable today as you consider your next move. This article seeks to help you decide the best path to choose whether to enter a Lease contract for a long-term stay or to a Rental agreement for a short-term stay.
You can also check this other article about "Tips for Efficient Remodeling of Commercial Space." if you are already planning to move into your new headquarters.