A lease agreement only grants the right to use the property, while a rental agreement grants the right to use it and receive benefits from it, such as the harvest from a field or income from running a business. Both contracts are governed by the Civil Code and both require the payment of rent, but they differ in the subject matter of the contract, maximum duration, notice period, and the obligations of the parties. The duration of the contract is not the determining factor—both leases and rental agreements can be concluded for a short term or for many years.
To sum it up
- Rent (Article 659 of the Civil Code) - a thing for use ; ownership (Article 693 of the Civil Code) - a thing for use and benefit .
- The subject of the lease is the object, and the subject of the rent is the object or right (for example, trademark rights).
- A lease agreement for a fixed term exceeding 10 years (30 years between entrepreneurs) is considered to be concluded for an indefinite term after that date; in the case of a lease, the maximum term is 30 years.
- In principle, a tenant can sublease an item; to do so, the tenant requires the landlord's consent.
What is rent?
In accordance with Article 659 of the Civil Code, Under a lease agreement, the landlord undertakes to provide the tenant with property for use for a fixed or indefinite period of time, and the tenant undertakes to pay the agreed-upon rent. Rent may be paid in cash or by other means.
Typical examples include renting an apartment, room, garage, car, or vacant commercial space where the tenant opens their own store or office. The tenant uses the property but receives no income or profit from it.
What is rent?
According to Article 693 of the Civil Code, Under the lease agreement, the lessor undertakes to provide the lessee with property for use and benefit , and the tenant undertakes to pay the agreed rent. Rent may be in the form of money, other compensation, or parts of the benefit , for example, shares of the harvest.
Simply put, benefits — these are the benefits that a thing brings: natural (crops, fruits, timber) or civil (income derived from the thing). Classic examples of lease are the lease of a field, a garden, a fish pond, or an operating restaurant with equipment. The provisions governing the lease of things also apply, accordingly, to lease of rights (Article 709 of the Civil Code).
Renting and leasing are the most important differences in legislation.
Lease provisions apply to lease agreements subject to special provisions (Article 694 of the Civil Code). These special provisions create the most important distinctions:
- Validity period. A lease agreement concluded for a term of more than 10 years is considered indefinite upon expiration; for entrepreneurs, this term is 30 years (Article 661 of the Civil Code). For rental agreements, the term is 30 years (Article 695 of the Civil Code).
- Transfer of an item to a third party. The tenant may sublease the property or transfer it for free use, unless prohibited by the contract (Article 668 of the Civil Code). The tenant may not do so without the landlord's consent, and violation of this prohibition entails termination of the lease without prior notice (Article 698 of the Civil Code).
- Repair. Under a lease agreement, the landlord maintains the property in a usable condition, and the tenant is responsible for incidental expenses (Article 662 of the Civil Code). The tenant has a broader obligation to make repairs necessary to maintain the leased property in good condition (Article 697 of the Civil Code).
- Procedure for use. The tenant is obliged to exercise proper management and may not change the intended use of the leased property without consent (Article 696 of the Civil Code).
- Termination of a lease agreement for an indefinite period. The statutory notice periods depend on the frequency of rent payments—for example, in the case of monthly rent, one month in advance at the end of the calendar month (Article 673 of the Civil Code). Agricultural land lease agreements, unless otherwise agreed, are terminated one year in advance at the end of the lease year, and other lease agreements are terminated six months before the end of the lease year (Article 704 of the Civil Code).
- Rent reduction. The tenant may demand a reduction in rent if, for reasons beyond his control, his usual income has been significantly reduced, for example, due to a natural disaster (Article 700 of the Civil Code).
Comparison Chart: Renting vs. Leasing
| Characteristic | Hire | Rent |
|---|---|---|
| Legal basis | Articles 659–692 of the Civil Code | Articles 693–709 of the Civil Code |
| Sphere of authority | Using things | Using and Taking Advantage |
| Element | Thing | Thing or right |
| Rent | Money or other benefits | Money, other benefits or part of them. |
| The boundaries of the established time | 10 years (30 years between periods of entrepreneurship) | 30 years old |
| Transfer of funds to a third party | Allowed unless prohibited by contract. | Only with the consent of the landlord. |
| Repair | Tenant - minor expenses | Tenant - repairs necessary to maintain the property in good condition. |
| Typical examples | Apartment, garage, car, empty space | Agricultural land, orchard, pond, catering establishment with equipment. |
Rent or lease – which agreement to choose?
The type of contract depends on the intended purpose of the item, not the title of the document. It's helpful to ask: Will the other party benefit from the item itself?
- Rent – when the object is used for its intended purpose: an apartment for living, an office space, a car for driving.
- Rent – when the property is intended for growing crops or generating income: land for cultivation, an orchard, a pond, a finished premises with equipment for running a business, a right of use, for example, a trademark.
- Form of the contract. A lease agreement for real estate or premises for a term of more than one year must be concluded in writing; otherwise, it is considered indefinite (Article 660 of the Civil Code). This rule also applies to rental agreements. Regardless of the rules, written form facilitates confirmation of the terms.
- Apartments. When renting residential premises, additional provisions of the Tenant Protection Act apply, including those relating, for example, to rules for terminating a lease agreement.
The type of contract also has tax implications (for example, when accounting for rental and lease income or when leasing agricultural land). This article is general in nature – for any specific contract, especially long-term ones or those involving agricultural land or business, it is recommended to consult with a lawyer, attorney, or tax advisor.
Frequently Asked Questions (FAQ)
Is a lease agreement simply an extension of the lease term?
No. The question of whether a contract is a lease or a rental is determined by the scope of rights, not the term. The lessee not only uses the property but also receives benefits from it, such as harvesting. Both types of contracts can be concluded for a fixed or indefinite term.
Is renting an apartment a lease or a rental agreement?
Renting out an apartment for residential use is considered a lease agreement. The tenant uses the premises but receives no benefit from it. The provisions of the Tenant Protection Act also apply to residential premises.
Is it possible to rent a field or does it need to be leased?
If someone is required to cultivate the land and harvest the crops, this usually means leasing it. Land can be leased if it is intended for a specific purpose, such as storage or parking.
Can a tenant sublease land?
Only with the landlord's consent (Article 698 of the Civil Code). Subletting without consent gives the landlord the right to terminate the lease without notice.
For what period can a lease agreement be concluded?
The Civil Code does not prohibit longer-term contracts, but a fixed-term lease exceeding 10 years (30 years between companies) is considered to be concluded for an indefinite term after the expiration of that term. In the case of lease agreements, this occurs after 30 years.
See also
- What is the difference between renting and leasing?
- What is the difference between leasing and long-term car rental?
- What is the difference between a contract of agency and a contract for the performance of specific work?
- What is the difference between stocks and bonds?
- What is the difference between social and municipal housing?