INTRODUCTION
A lease agreement is a type of agreement in which there are Two parties. One is the original and actual owner of any property (like for example of any property, land, any assets like car, any tangible assets) to any other person who has the requirement of that particular thing or property or assets. In this the person who gives his property is called lessor and the person who is renting or leasing the property is called lessee.
Now Comes the lease agreement. So, lease agreement means it is an agreement which tells about the contractual relationships between lessor and lessee.
In earlier times it was seen that many problems were coming like increasing of the rent, misusing of the property, expansion in the use of an asset of their time period.
So, to avoid these kinds of issues in future, it is important to make a lease agreement. A lease agreement is an important document which lays down the following guidelines. It abides the lessor and lessee with the Duties and Obligations.
TYPES OF LEASE
Now we come to know about how many types of lease are there?
1. Capital lease – It is also known as a financial lease. it is a long-term lease and also non-cancellable. in this the lessee has to pay the money till the expiration of the agreement.
2. Operating lease – This type of lease is a short-term lease. it is also cancellable but with the prior notice. the lease term is shorter than the economic life of the assets.
3. Sale and Lease back– Under this type of lease a person who sells his property to another is lease back to the same person. for instance, if I have sold the land to you and after some time I take back the land on lease. So, this is a Sale and Lease back. It is beneficial to both the parties.
4. Leveraged Leasing – This is a special type of lease. In this there are three parties and that is lessor, lessee and lender. It is usually for aircraft, oil rigs etc. In this a lessor provides an equity share (like 34%) of the leased asset cost and lenders provide balance of the financing.
5. Specialized Service Lease-In this type of agreement, the lessor provides specialized personal services in addition to providing its use.
6. Cross Border Lease:
Lease across the national frontiers is called cross broker leasing. The recent development in economic liberalisation, the cross border leasing is gaining greater importance in areas like aviation, shipping and other costly assets which base likely to become absolute due to technological changes.
WHAT ARE THE ESSENTIALS REQUIREMENTS?
The essential requirements are therefore given under:
- All the details should be written under it. For instance, the address of both the parties, signatures of the parties, and mentioning names of all the parties.
- All the terms and conditions must be written. like the terms of the leasing, what will be the mode, what will be the mode of payment? what will be the rent? if the person wants to continue, then what will be the conditions?
- The lease agreement should contain all the details about the occupancy limits. Movable Assets must also be mentioned in the agreement with terms and conditions.
- The maintenance and repair related objective should also be mentioned. for instance, what if tenant wants to apply a coat of new paint, wants to do some of the repair and maintenance work.
- Rental deposits should be paid as a Security money. There is verbal lease agreement.
So, this was all about the lease and lease agreement. there are following things to consider before signing the agreement.
To draft a Lease Agreement click here.
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