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Renting, also known as hiring or letting, is an agreement where a payment is made for the use of a good, service or
property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, re ...
owned by another over a fixed period of time. To maintain such an agreement, a rental agreement (or lease) is signed to establish the roles and expectations of both the tenant and landlord. There are many different types of leases. The type and terms of a lease are decided by the landlord and agreed upon by the renting tenant.


History

Various types of rent are referenced in
Roman law Roman law is the law, legal system of ancient Rome, including the legal developments spanning over a thousand years of jurisprudence, from the Twelve Tables (), to the (AD 529) ordered by Eastern Roman emperor Justinian I. Roman law also den ...
: rent (''canon'') under the long leasehold tenure of Emphyteusis; 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 India, officially the Republic of India, is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area; the List of countries by population (United Nations), most populous country since ...
,
Spain Spain, or the Kingdom of Spain, is a country in Southern Europe, Southern and Western Europe with territories in North Africa. Featuring the Punta de Tarifa, southernmost point of continental Europe, it is the largest country in Southern Eur ...
,
Australia Australia, officially the Commonwealth of Australia, is a country comprising mainland Australia, the mainland of the Australia (continent), Australian continent, the island of Tasmania and list of islands of Australia, numerous smaller isl ...
,
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
and the
United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
) rent paid in a
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. Traders generally negotiate through a medium of cr ...
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 purchase, i.e "renting by necessity". *Reducing
financial risk Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financi ...
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 tool is an Physical object, object that can extend an individual's ability to modify features of the surrounding environment or help them accomplish a particular task. Although many Tool use by animals, animals use simple tools, only human bei ...
, a
truck A truck or lorry is a motor vehicle designed to transport freight, carry specialized payloads, or perform other utilitarian work. Trucks vary greatly in size, power, and configuration, but the vast majority feature body-on-frame construct ...
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. *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'', 2008-08-22. Retrieved on 2009-10-01.
According to a poll by YouGov, 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. The Great Recession may have contributed to the rapid growth of online rental marketplaces, such as erento, since 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 or
contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...
involved to specify the terms of the rental, which are regulated and managed under contract law. Examples include letting out real estate (real property) for the purpose of housing tenure (where the tenant 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, 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, Canadian English), flat (British English, Indian English, South African English), tenement (Scots English), or unit (Australian English) is a self-contained housing unit (a type of residential real estate) that ...
, house,
building A building or edifice is an enclosed Structure#Load-bearing, structure with a roof, walls and window, windows, usually standing permanently in one place, such as a house or factory. Buildings come in a variety of sizes, shapes, and functions, a ...
, 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 tenancy agreement for real estate is often called a lease, and usually involves specific property rights in
real property In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, refers to parcels of land and any associated structures which are the property of a person. For a structure (also called an Land i ...
, 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: * motion pictures on VHS or DVD, of audio CDs, of
computer program A computer program is a sequence or set of instructions in a programming language for a computer to Execution (computing), execute. It is one component of software, which also includes software documentation, documentation and other intangibl ...
s 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 computer data storage, data computers can read, but not write or erase. Some CDs, called enhanced CDs, hold b ...
. *
transport Transport (in British English) or transportation (in American English) is the intentional Motion, movement of humans, animals, and cargo, goods from one location to another. Mode of transport, Modes of transport include aviation, air, land tr ...
equipment, such as an
automobile A car, or an automobile, is a motor vehicle with wheels. Most definitions of cars state that they run primarily on roads, Car seat, seat one to eight people, have four wheels, and mainly transport private transport#Personal transport, peopl ...
or a
bicycle A bicycle, also called a pedal cycle, bike, push-bike or cycle, is a human-powered transport, human-powered or motorized bicycle, motor-assisted, bicycle pedal, pedal-driven, single-track vehicle, with two bicycle wheel, wheels attached to a ...
. *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
tool A tool is an Physical object, object that can extend an individual's ability to modify features of the surrounding environment or help them accomplish a particular task. Although many Tool use by animals, animals use simple tools, only human bei ...
s, such as a chainsaw, laptop, IT equipment or something more substantial, such as a forklift. *large equipment such as cranes, oil rigs and submarines. *a deckchair or beach chair and umbrella. *
furniture Furniture refers to objects intended to support various human activities such as seating (e.g., Stool (seat), stools, chairs, and sofas), eating (table (furniture), tables), storing items, working, and sleeping (e.g., beds and hammocks). Furnitur ...
*designer handbags,
jewelry Jewellery (or jewelry in American English) consists of decorative items worn for personal adornment such as brooches, ring (jewellery), rings, necklaces, earrings, pendants, bracelets, and cufflinks. Jewellery may be attached to the body or the ...
,"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, refrigerators,
television Television (TV) is a telecommunication medium for transmitting moving images and sound. Additionally, the term can refer to a physical television set rather than the medium of transmission. Television is a mass medium for advertising, ...
s, 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 A hotel is an establishment that provides paid lodging on a short-term basis. Facilities provided inside a hotel room may range from a modest-quality mattress in a small room to large suites with bigger, higher-quality beds, a dresser, a re ...
, using a
computer A computer is a machine that can be Computer programming, programmed to automatically Execution (computing), carry out sequences of arithmetic or logical operations (''computation''). Modern digital electronic computers can perform generic set ...
in an Internet cafe, or riding in a taxicab (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 An identity document (abbreviated as ID) is a documentation, document proving a person's Identity (social science), identity. If the identity document is a plastic card it is called an ''identity card'' (abbreviated as ''IC'' or ''ID card''). ...
*one signs a
contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...
; 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 structured presentation of recorded information, primarily verbal and graphical, through a medium. Originally physical, electronic books and audiobooks are now existent. Physical books are objects that contain printed material, ...
s from a
library A library is a collection of Book, books, and possibly other Document, materials and Media (communication), media, that is accessible for use by its members and members of allied institutions. Libraries provide physical (hard copies) or electron ...
could be considered renting when there is a fee per book. However the term ''lending'' is more common.


Leasing

Rental of
personal property Personal property is property that is movable. In common law systems, personal property may also be called chattels or personalty. In civil law (legal system), civil law systems, personal property is often called movable property or movables—a ...
or
real property In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, refers to parcels of land and any associated structures which are the property of a person. For a structure (also called an Land i ...
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. In housing, when a tenant rents an apartment but only pays for their room and the common space is a lease-by-room arrangement.


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, 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, used in the US and
Canada Canada is a country in North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, making it the world's List of coun ...
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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