Leasing and lease - what are the differences between them?

Many online dictionaries indicate lease as a synonym for leasing - and vice versa. However, while both types of contracts allow the use of items that are not owned by the company, there are many differences between the two. What distinguishes leasing from rental - we explain.

Different formal rules

Discrepancies already appear in the form of the concluded contract. According to the Civil Code, the leasing agreement should be made in writing, otherwise null and void. The method of concluding the contract between the parties in the case of a lease depends only on their preferences. In this case, the period of validity of the agreement is not specified. The exception is a contract concluded for a definite period of more than one year. Then it has to be developed in writing

The greater restrictions in the leasing contract also apply to the parties that may participate in it. The financing party should always be an entrepreneur, but the beneficiary may not even have his own business.The rules in the lease agreement are more flexible - it can be concluded by both entrepreneurs and private persons who do not conduct business activities. It is also permissible that one of the parties is a company and the other is a private entity.

Leasing and lease - detailed differences

Another restriction on leasing contracts is related to time. According to the definition found in the Civil Code, it must always be concluded for a specified period, i.e. when signing the contract, a specific expiry date must be specified. On the other hand, a lease contract may be valid both for a definite period and an indefinite period. In addition, at the time specified in the leasing contract, the user is obliged to pay a monetary remuneration, the amount of which should be at least as much as the price or remuneration for the purchase of things by the financing party.

In the case of a lease agreement, the financing fee for the financing party is periodic and its value is not the same as the value of the item. There is also no set minimum rate for such a fee. It is only specified in Art. 693 §2 of the Civil Code, that the rent for the financing party may be in the form of both cash and a fraction of the benefits or take the form of another benefit.

Leasing versus lease - advantages of both solutions

Lease and lease agreements seem to be similar but, as you can see, they differ in several aspects. The issues cited above make the lease more flexible in terms of time, remuneration, and parties that may participate in it.

However, the leasing contract, thanks to its numerous restrictions, provides entities deciding on it, the precise definition of individual aspects, as well as their safety.