Company News

What Is The Lease? General Terms

Leasing

The lease is any contract, agreement or relationship that is celebrated between two contractual parties, by means of which an assignment is produced in this case, a real estate for a certain time.

The purpose of this process is that the party that makes use of the leased property must make an economic consideration.

The parties involved in the lease are:

Lessor: is the owner of the property.

Lessee: is the person or company that pays for the use and enjoyment of the property.

Rent: is the amount of money that the lessee pays the lessor for the use of the property.

Sub lessee: The lessee with prior authorization from the lessor grants the total or partial use of the property to a third party in a modality.

The lease can be provided in goods or services; however, the sector most inclined to this type of contract is real estate.

The real estate rental market ranges from houses, to commercial premises and, above all, land. This allows the owner to obtain an additional return for a certain period.

Advantages and Disadvantages of Leasing Land

Like any type of purchase, acquiring a property must be carried out after having carried out an analysis of the advantages and disadvantages that will be obtained by integrating it into the personal or company assets.

Leasing land is an economic benefit derived from its acquisition, which entails rights and responsibilities arising from the contract entered into with the lessee.

Advantages

Among the main advantages of leasing land or any real estate are:

1. Retain possession of the property

By being the owner, ownership of the asset is preserved, which allows it to continue to be included in the balance sheet and as part of the assets.

This is very useful when you want to acquire financing in which some asset is required as collateral.

Keeping ownership and earning additional income is a great way to protect your wealth and save for retirement.

2. Return available for reinvestment

The rent product of the lease becomes liquidity for the owner, who can reinvest in the acquisition of more land, in improvements to the property or use it for other purposes.

Additionally, as time passes, the land will increase in value, generating a higher return on investment and excellent profitability.

3. Simple lease procedures

This procedure is very simple. It can be carried out through a notary, public notary or through the intervention of a private lawyer, who will celebrate the contract privately.

The lease is a legal document through which the agreement between two parties to rent a space is made official, with clauses that specify the changes or the use that the tenant will give it.

Although the procedure is simple, it is important to take into account the expenses that the process will generate, that is, the lawyer’s fees.

Disadvantages

Among the main disadvantages of leasing land or any real estate are:

1. Poor construction and wear

Depending on the clauses of the contract, the tenant can build on the land; however, the infrastructure that is developed there belongs to the owner.

For this reason, some tenants especially those who plan to stay for a short time may carry out poor construction so as not to invest too much with facilities that they will not own, or that require many expenses for their maintenance.

It is important to specify in a contract what and how can be built on leased land. The rental of land to franchises is generally one of the safest since their buildings must meet certain quality standards.

Smaller businesses or those that do not require the land for a long time usually opt for renting commercial premises.

2. Delinquency

Although the amount is periodic and fixed, the lessee may take time to pay, causing delays in the lessor’s financial planning, so it is suggested to contemplate some type of penalty in the contract or charge for late payment.

It may also be useful to investigate the tenant’s references beforehand and verify that the undertaking or business that will be put on the land is profitable.

3. Waiting time

If the area or location from which a piece of land was acquired is not well chosen, the lessor may see his objective of obtaining short-term profitability postponed.

It will depend on the city, which are the best areas to buy land, as these vary from place to place. You should consider what a tenant who wants to build a profitable business is looking for.

Leave a Reply

© 2022 by Global Leasing Alliance
Website Design by
Website Design & SEO Solutions provided by URated.