Rental contract of movable property: renting and leasing

Our legal system includes different ways of renting movable property (cars, boats, motorcycles, machinery, animals, furniture, etc.). In this guide we will explain renting and leasing contracts. No doubt these formats are being widely used in practice, both by individuals and companies for leasing.

Renting and Leasing contract: keys to know them

Currently, renting or leasing contracts are very demanded, because you can get a good in a simple and fast way. These two models are long term rental contracts, but even if they have this similarity they are very different. Both offer new goods, but the services offered, the characteristics and the purpose for which the contract is made are very different. In the following lines you will know all the characteristics and advantages of each one of these contracts. Prepare your renting and Leasing contract knowing in advance which one is better suited to your rental needs:

Renting contract

In our country, the fastest and most comfortable rental system is renting. This lease assumes that as long as the monthly fee is paid, the thing belongs to the tenant. Its duration usually extends from one to five years, and once the contract has ended, the thing comes back to its owner, who can rent or sell it in any second-hand market.

Two parts are normally involved in this contract:

•  The landlord (owner or person with the ability to make the rent) 
• The tenant (who rents the thing)

Advantages of renting

• It can be used by individuals and companies. is paid for monthly installments.
• These fees usually include compulsory insurance, taxes and roadside assistance.
• It is easy to hire for those who do not have enough credit, because it avoids the need to have to borrow. 
• Involves less paperwork and requirements for the contracting. 
• At the end of the lease in the agreed time, the thing returns to its owner, being able to make a new lease.

Leasing contract

Leasing does not rent the good itself, but the financing of it.  The “sale in instalments of Movable Property Act of 28/1998, of 13 July”, refers to the financing loans, both to sellers and buyers, to facilitate the acquisition of movable property in instalments, when they give to the financier their credit against the Buyer. In addition, it is a financing advantage in that it is possible to negotiate the effects of the leasing contract, for example, to deduct quantities at the price of a team if its purpose is a future sale.

When will the leasing contract be convenient?

• When we have companies. 
• With a shortage of current capital and need of funding. 
• Want to test a certain product.
• We are thinking of a purchase option. 
• We look for tax advantages, as quotas can be deducted from the final price.

How does the leasing contract works

Through leasing, the employer can use an object for a certain time, paying a fixed periodic amount, and allowing his acquisition by a purchase option when the time limit comes, contributing the remainder of the financed part.

Normally, the leasing contract is used to finance machinery, vehicles and useful objects of considerable value. Although it also must be used for real estate. Banks tend to offer leasing contracts because of their facility to carry out the financing.

This contract distinguishes two contracts connected but differentiated: The one of sale and the financial leasing, (and it is advisable to make a third contract of insurance with the possibility of risks). Therefore, in both contracts the relationship between all three can be distinguished:

1. The entrepreneur or future user of the thing you want to finance. This one will take responsibility for the matter in case of loss or deterioration.
2. The leasing company, which will lease the financing, buying the good from the supplier. It will be responsible for the contractual liability in case of insolvency of the user. 
3. The owner or supplier of the thing.

The contract must necessarily be registered in the registry of movable property by means of the official model established for the purpose.

Now that you know the contract of renting and Leasing, consult our specialist lawyers if you are interested in making them for the preparation of both a financing company and your contractual documents.