What is the difference between a lease and a lease?
A fixed asset in a company is a valuable investment, but few companies can afford to finance it with cash. In this situation, there are two options to meet their needs - leasing or renting. Both allow the use of things that are not owned by the company. What is the difference between a lease and a lease?
It should come as no surprise to anyone that before an entrepreneur can use a leased or leased asset in his company, it will be necessary to conclude an appropriate contract. In this case, both types are regulated by one act - the Civil Code.
The definition of a leasing contract can be found in Art. 7091 of the Civil Code. According to it, the parties are referred to as the financing party - i.e. the owner of the equipment covered by the agreement, and the user - i.e. the person who will use the equipment. Through the leasing contract, the financing party undertakes, in the scope of the company's activity, to purchase the thing specified in the contract and give it to the user to use or use and receive benefits for a specified period of time. The beneficiary undertakes to pay the financing party in the agreed installments a cash remuneration, at least equal to the price or remuneration for the purchase of goods by the financing party.
The concept of a lease contract has been explained in Art. 693 § 1 of the Civil Code. In this case, the parties were defined as the lessor - that is, the owner of the equipment and the lessee - that is, the lessee. The lessor undertakes to give the lessee the thing to use and collect benefits for a specified or indefinite period. On the other hand, the lessee undertakes to pay the lessor the agreed rent.
Lease and leasing - basic differences
After the initial review of the definitions, it is clear that leasing and lease are not the same. What exactly are the differences between them?
First of all, the lease agreement is more flexible in terms of the parties that can participate in it. It may be concluded both between two entrepreneurs, and on a private basis between two persons who do not conduct their own business. There are also no contraindications for concluding "mixed" contracts - that is, those in which, on the one hand, there is a company, and on the other - a private person.
However, in the leasing contract, the rules are a bit more restrictive - the financing party must always be an entrepreneur. On the other hand, the user may run a business, but may also be a person who does not have his own business activity. In this case, therefore, we are dealing with the so-called a unilaterally professional contract in which at least one of the parties is an entrepreneur.
Another difference between the discussed contracts concerns the time for which they are concluded. In this case, the lease agreement is also characterized by greater flexibility - it may be valid for a definite period as well as an indefinite one.
The leasing contract is more restrictive in this matter - the definition already indicates that it is always concluded for a definite period. Therefore, when deciding on this form, it will be necessary to indicate the date on which the contract will expire at the latest.
Also, the issue of remuneration under contracts remains different, and as in previous differences - the parties are left with more freedom to lease. The act only indicates that the lessee is obliged to pay the lessor a "specified rent", but the minimum amount of such obligation has not been established. Moreover, in accordance with §2 of the previously cited Art. 693 of the Code, the rent may be transferred both in cash and in the form of another benefit or a fraction of the benefits.
As for the leasing contract, the act indicates the minimum amount of such a liability on the part of the user. Therefore, it must be at least equal to the price or remuneration for the acquisition of the goods by the financing party.
The very form of the drawn up contract looks different in the case of leasing and in the case of lease. The former must always be made in writing, otherwise null and void. This means that any other - e.g. verbal - attempt to conclude a leasing contract will be considered invalid.
On the other hand, a lease agreement should be made in writing only if it is concluded for a definite period longer than one year. Otherwise, it is not necessary to create a written document - then the contract should be considered as concluded for an indefinite period.
The last difference between leasing and leasing concerns the subject of the contract. In the first case, only things can be leased. On the other hand, not only tangible equipment or premises can be leased, but also intangible rights.
It can therefore be concluded that although leasing and lease contracts usually relate to very similar, often identical events, they differ in several basic issues. These differences speak in favor of the lease in terms of flexibility and freedom to conclude an agreement, and in favor of lease - when it is important for the parties to precisely define and secure its most important elements.