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Renting, also known as hiring or letting, is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A
gross lease A gross lease is a type of commercial lease where the tenant pays a flat rental amount, and the landlord pays for all operating expenses regularly incurred by the ownership, including taxes, electricity and water. Most apartment leases resemble gr ...
is when the
tenant Tenant may refer to: Real estate *Tenant, the holder of a leasehold estate in real estate *Tenant-in-chief, in feudal land law *Tenement (law), the holder of a legal interest in real estate *Tenant farmer *Anchor tenant, one of the larger stores ...
pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership. An example of renting is
equipment rental Equipment rental, also called plant hire in some countries (in the UK for instance), is a service industry providing machinery, equipment and tools of all kinds and sizes (from earthmoving to powered access, from power generation to hand-hel ...
. Renting can be an example of the sharing economy.


History

Various types of rent are referenced in Roman law: rent (''canon'') under the long leasehold tenure of
Emphyteusis Emphyteusis (Greek: implanting) is a contract for land that allows the holder the right to the enjoyment of a property, often in perpetuity, on condition of proper care, payment of tax and rent. The right encompasses assignment and of descent. His ...
; rent (''reditus'') of a farm; ground-rent (''solarium''); rent of state lands (''vectigal''); and the annual rent (''prensio'') payable for the ''jus superficiarum'' or right to the perpetual enjoyment of anything built on the surface of land.


Reasons for renting

There are many possible reasons for renting instead of buying, for example: *In many jurisdictions (including India, Spain, Australia, United Kingdom and the United States) rent paid in a trade or business is tax-deductible, whereas rent on a
dwelling In law, a dwelling (also known as a residence or an abode) is a self-contained unit of accommodation used by one or more households as a home - such as a house, apartment, mobile home, houseboat, vehicle, or other "substantial" structure. The ...
is not tax-deductible in most jurisdictions. *Financial inadequacy, such as renting a house when one is unable to purchase, i.e "renting by necessity". *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 tenant may want to leave the burden of upkeep of the property (mowing the lawn, shovelling snow, etc.) to the owner or his agents. *There is no need to worry about lifespan and
maintenance Maintenance may refer to: Biological science * Maintenance of an organism * Maintenance respiration Non-technical maintenance * Alimony, also called ''maintenance'' in British English * Champerty and maintenance, two related legal doctri ...
. *Renting keeps off-balance-sheet the debt that would burden the balance sheet of a company in case the property would have been bought. *Renting is good for the environment if products are used more efficiently by maximizing utility rather than being disposed of, overproduced and underutilized. *Risks aside, renting has the potential to generate a regular stream of revenue for the owner. The more the churn (the number of times the item is rented out) the higher the income. Eventually, the rental income crosses the product procurement value and every churn post that becomes a profit for the owner *Renting often also becomes an alternate revenue pool for idle inventory vs. overly depending on a stagnant / slowing retailing business environment


Growth of rental industry

Short-term rental of all sorts of products (excluding real estate and holiday apartments) already represents an estimated €108 billion ($160 billion) annual market in Europe and is expected to grow further as the internet makes it easier to find specific items available for rent.Schenker, Jennifer
"Tough Times? Rent, Don't Buy, with Erento"
''
BusinessWeek ''Bloomberg Businessweek'', previously known as ''BusinessWeek'', is an American weekly business magazine published fifty times a year. Since 2009, the magazine is owned by New York City-based Bloomberg L.P. The magazine debuted in New York City ...
'', 2008-08-22. Retrieved on 2009-10-01.
According to a poll by
YouGov YouGov is a British international Internet-based market research and data analytics firm, headquartered in the UK, with operations in Europe, North America, the Middle East and Asia-Pacific. In 2007, it acquired US company Polimetrix, and since ...
, 76% of people looking to rent would go to the internet first to find what they need; rising to 88% for those aged 25–34. It has been widely reported that the financial crisis of 2007–2010 may have contributed to the rapid growth of online rental marketplaces, such as
erento Erento is the largest online rental marketplace in Germany. Founded in 2003 by Chris Müller and Uwe Kampschulte as a Berlin start-up, Erento currently operates in the UK, Finland, Austria, Germany and Switzerland. History The company was fo ...
, as consumers are more likely to consider renting instead of buying in times of financial hardship. Environmental concerns, fast depreciation of goods, and a more transient workforce also mean that consumers are increasingly searching for rentals online. A 2010 US survey found 27% of renters plan to never buy a home.''Boston Metro'', 19 August 2010, p 6. Citing survey by Trulia.com.


Rental investment

Net income received, or losses suffered, by an investor from renting of properties is subject to idiosyncratic risk due to the numerous things that can happen to real property and variable behavior of tenants.


Rental agreements

There is typically an implied, explicit, or written
rental agreement A rental agreement is a contract of rental, usually written, between the owner of a property and a renter who desires to have temporary possession of the property; it is distinguished from a lease, which is more typically for a fixed term. As a ...
or contract involved to specify the terms of the rental, which are regulated and managed under
contract law A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
. Examples include letting out
real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...
(real property) for the purpose of
housing tenure Housing tenure is a financial arrangement and ownership structure under which someone has the right to live in a house or apartment. The most frequent forms are tenancy, in which rent is paid by the occupant to a landlord, and owner-occupancy, ...
(where the tenant rents a residence to live in),
parking Parking is the act of stopping and disengaging a vehicle and leaving it unoccupied. Parking on one or both sides of a road is often permitted, though sometimes with restrictions. Some buildings have parking facilities for use of the buildings' ...
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 Tenant may refer to: Real estate *Tenant, the holder of a leasehold estate in real estate *Tenant-in-chief, in feudal land law *Tenement (law), the holder of a legal interest in real estate *Tenant farmer *Anchor tenant, one of the larger stores ...
, paying rent to the owner of the property, often called a landlord (or landlady). The real estate rented may be all or part of almost any real estate, such as an
apartment An apartment (American English), or flat (British English, Indian English, South African English), is a self-contained housing unit (a type of residential real estate) that occupies part of a building, generally on a single story. There are man ...
, 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 Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...
. The tenancy 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 A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
, 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: *
motion picture A film also called a movie, motion picture, moving picture, picture, photoplay or (slang) flick is a work of visual art that simulates experiences and otherwise communicates ideas, stories, perceptions, feelings, beauty, or atmosphere ...
s on VHS or
DVD The DVD (common abbreviation for Digital Video Disc or Digital Versatile Disc) is a digital optical disc data storage format. It was invented and developed in 1995 and first released on November 1, 1996, in Japan. The medium can store any kin ...
, of
audio CD Compact Disc Digital Audio (CDDA or CD-DA), also known as Digital Audio Compact Disc or simply as Audio CD, is the standard format for audio compact discs. The standard is defined in the ''Red Book'', one of a series of Rainbow Books (named fo ...
s, of computer programs on
CD-ROM A CD-ROM (, compact disc read-only memory) is a type of read-only memory consisting of a pre-pressed optical compact disc that contains data. Computers can read—but not write or erase—CD-ROMs. Some CDs, called enhanced CDs, hold both compute ...
. *
transport Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipelin ...
equipment, such as an automobile or a
bicycle A bicycle, also called a pedal cycle, bike or cycle, is a human-powered or motor-powered assisted, pedal-driven, single-track vehicle, having two wheels attached to a frame, one behind the other. A is called a cyclist, or bicyclist. Bic ...
. *ships and boats, in which case rental is known as chartering, and the rent is known as ''hire'' or ''freight'' (depending on the type of charter) *aircraft, in which case rental is known as chartering, or leasing if the rental is longer term *specialized tools, such as a
chainsaw A chainsaw (or chain saw) is a portable gasoline-, electric-, or battery-powered saw that cuts with a set of teeth attached to a rotating chain driven along a guide bar. It is used in activities such as tree felling, limbing, bucking, pruning, ...
, laptop, IT equipment or something more substantial, such as a
forklift A forklift (also called lift truck, jitney, hi-lo, fork truck, fork hoist, and forklift truck) is a powered industrial truck used to lift and move materials over short distances. The forklift was developed in the early 20th century by various c ...
. *large equipment such as cranes, oil rigs and submarines. *a
deckchair A deckchair (or deck chair) is a folding chair, usually with a frame of treated wood or other material. The term now usually denotes a portable folding chair, with a single strip of fabric or vinyl forming the backrest and seat. It is meant f ...
or beach chair and umbrella. * furniture *designer handbags, jewelry,"If you want it, rent it ... from a 'must have' handbag to an Aston Martin"
'' The Observer'', 2009-01-04. Retrieved on 2009-09-09.
sunglasses and watches. *Home appliances such as washing machines,
refrigerator A refrigerator, colloquially fridge, is a commercial and home appliance consisting of a thermally insulated compartment and a heat pump (mechanical, electronic or chemical) that transfers heat from its inside to its external environment so t ...
s, televisions, microwave ovens, and air-conditioning units 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 A taxi, also known as a taxicab or simply a cab, is a type of vehicle for hire with a driver, used by a single passenger or small group of passengers, often for a non-shared ride. A taxicab conveys passengers between locations of their choic ...
(some forms of English use the term "hiring" for this activity). 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) If the customer has a credit account with the rental company, they may rent over several months (or years) and will receive a recurring or continuation invoice each rental period until they return the equipment. In this case deposits are rarely required. In certain types of rental (sometimes known as operated or wet rental) the charge may be calculated by the rental charge + timesheets of operators or drivers supplied by the rental company to operate the equipment. This is particularly relevant for crane rental companies. Sometimes the risk that the good is kept is reduced by it being a special model or having signs on it that cannot 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
book A book is a medium for recording information in the form of writing or images, typically composed of many pages (made of papyrus, parchment, vellum, or paper) bound together and protected by a cover. The technical term for this physical a ...
s from a library could be considered renting when there is a fee per book. However the term ''lending'' is more common.


Leasing

Rental of
personal property property is property that is movable. In common law systems, personal property may also be called chattels or personalty. In civil law systems, personal property is often called movable property or movables—any property that can be moved fr ...
or real property for periods often longer than a year, which is governed by the signing of a lease, is known as leasing. Leasing is usually used for high-value capital equipment, both in business and by consumers. A lease in which the renter benefits from an increase in value of the asset is known as a finance lease. A leasing agreement which is not a finance lease is known as an operating lease.


Rent to own

A rental agreement may provide for the renter or lessee to become the owner of the asset at the end of the rental period, usually at the renter's option on payment of a nominal fee. Such arrangements may be known as *
Rent-to-own Rent-to-own, also known as rental purchase or rent-to-buy, is a type of legally documented transaction under which tangible property, such as furniture, consumer electronics, motor vehicles, home appliances, real property, and engagement rings ...
, a term used in the United States for rental of furniture or appliances. The term is also used in the US for real estate transactions, where the tenant has an option to purchase the property at a fixed price at a specified future time. Such arrangements are also known as lease-option, lease-to-own or lease to purchase option. * Hire purchase, used in the UK and other countries for the purchase of cars, other consumer equipment and business equipment. The term lease-purchase is also used. *
Closed-end leasing Closed-end leasing is a contract-based system governed by law in the U.S. and Canada. It allows a person the use of property for a fixed term, and the right to buy that property for the agreed residual value when the term expires. Closed-end l ...
, used in the US and Canada for the leasing of cars. Unlike in hire purchase, the asset is sold at its residual value at the end of the term, rather than for a nominal amount.


References

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