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Renting
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Renting is an agreement where a payment is made for the temporary use of a good or property owned by another person or company. The owner of the property may be referred to as the lessor and the party paying to use the property as the lessee or renter. There is typically an implied, explicit, or written rental agreement or contract involved to specify the terms of the rental, which are regulated and managed under contract law.
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Encyclopedia
Renting is an agreement where a payment is made for the temporary use of a good or property owned by another person or company. The owner of the property may be referred to as the lessor and the party paying to use the property as the lessee or renter. There is typically an implied, explicit, or written rental agreement or contract involved to specify the terms of the rental, which are regulated and managed under contract law. Examples include:
- Renting real estate (real property) for the purpose of housing tenure (where the lessee rents a residence to live in), parking space for a vehicle(s), storage space, whole or portions of properties for business, agricultural, institutional, or government use, or other reasons.
- When renting real estate, the person(s) or party who lives in or occupies the real estate is often called a tenant, paying rent to the owner of the property, the leasor, often called a landlord (or landlady). The real estate rented may be all or part of almost any real estate, such as an apartment, house, building, business office(s) or suite, land, farm, or merely an inside or outside space to park a vehicle, or store things all under Real estate law.
- The rental agreement for real estate is often called a lease, and usually involves specific property rights in real property, as opposed to chattels.
- In India , the rental income on property is taxed under the head "income from house property". A deduction of 30 % is allowed from total rent which is charged to tax.
The time use of a chattel or other so called "personal property" is covered under general contract law, but the term lease also nowadays extends to long term rental contracts of more expensive non-Real properties such as automobiles, boats, planes, office equipment and so forth. The distinction in that case is long term versus short term rentals. Some non-real properties commonly available for rent or lease are:
- The renting of motion pictures on VHS or DVD, of audio CDs, of computer programs on CD-ROM.
- Renting transport equipment, such as an automobile, boat, or a bicycle.
- Renting somewhat specialized tools, such as a chainsaw, laptop, IT equipment or something more substantial, such as a forklift.
- Renting a deckchair or beach chair and umbrella.
- Furniture
- Designer handbags, jewelry, sunglasses and watches.
In various degrees, renting can involve buying services for various amounts of time, such as staying in a hotel, using a computer in an Internet cafe, or riding in a taxicab (some forms of English use the term "hiring" for this activity).
Reasons for renting
There are many possible reasons for renting instead of buying, for example:
- In many jurisdictions (including India, Spain, Australia, and the United States) rent used in a trade or business is tax deductible, whereas rent on a dwelling is not tax deductible in most jurisdictions.
- Financial inadequacy, such as renting a house when one is unable to buy it. One may not wish to pay the full price that ownership would need, allowing for smaller payments over a specified period of time.
- Reducing financial risk due to depreciation and transaction costs, especially for real estate which might be needed only for a short amount of time.
- When something is needed only temporarily, as in the case of a special tool, a truck or a skip.
- When something is needed that may or may not be already owned but is not in proximity for use, such as renting an automobile or bicycle when away on a trip.
- Needing a cheaper alternative to buying, such as renting a movie: a person is unwilling to pay the full price for a movie, so they rent it for a lesser price, but give up the chance to view it again later.
- The renter may want to leave the burden of upkeep of the property (mowing the lawn, shoveling snow, etc.) to the owner or his agents.
- There is no need to worry about lifespan and maintenance.
- Renting keeps off-balance-sheet the debt that would burden the balance sheet of a company in case the property would have been bought.
Some merchants have rent-to-own (also called lease-purchase or hire purchase) programs, usually for expensive items such as houses or appliances. Houses however are more commonly sold using a mortgage rather than hire purchase, the difference being who the house legally belongs to during the payment period: the seller in the former case, and the buyer in the latter.
As seen from the examples, some rented goods are used on the spot, but usually they are taken along; to help guarantee that they are brought back, one or more of the following applies:
- one shows an identity document
- one signs a contract; any damage already present when renting may be noted down to avoid that the renter is blamed for it when the good is returned
- one pays a damage deposit (a refundable fee that may be used in part to pay for damage caused by the renter)
Sometimes the risk that the good is kept is reduced by it being a special model or having signs on it that can not easily be removed, making it obvious that it is owned by the rental company; this is especially effective for goods used in public places, but even when used at home it may help due to social control.
Persons and businesses that regularly rent goods from a particular company generally have an account with that company, which reduces the administrative procedure (transaction costs) on each occasion.
Signing out books from a library could be considered renting when there is a fee per book. However the term lending is more common.
See also
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