Did you know that the law provides protections when you lease an item? As a lessee, you have rights… and so do the owners of the item! Your rights and responsibilities vary depending on the duration of your lease.
The law protects you when you lease an item for less than 4 months – whether you lease a ball gown for a day, a chocolate fountain for a week or ski equipment for the season. And the law provides even greater protection when you lease an item for 4 months or more, such as when you lease a musical instrument for 5 months or a power tool for the year.
The rules for renting an apartment are different than the ones in this article.
Leasing an item over the short, medium or long term
The law sets rules for both lessees and owners who enter a lease. Lessees and owners have responsibilities for the entire duration of their lease. In exchange, they have the right to require that the other person also fulfill their responsibilities.
These responsibilities apply to leases of less than 4 months (short or medium term) and to leases of 4 months or more (long term). In other words, you must fulfill these responsibilities, regardless of the duration of your lease.
Here are your responsibilities when you lease an item:
Lessees’ responsibilities
Owners’ responsibilities
Basic responsibilities
Pay the rent on time.
Allow the lessee to use the item for the duration of the lease.
Leasing the item in good condition
Take care of the item and use it prudently.
Provide an item in good condition.
Repairing the item
Inform the owner when the item needs to be repaired.
Repair the item if it is damaged.
Paying for repairs
Pay for the repairs when the item is damaged.
Good news! Items are protected by the same warranties as purchased items.
Pay for the repairs when the item is damaged due to superior force (such as a fire or hail storm).
Subleasing and assigning
Inform the owner before subleasing the item or assigning the lease.
Allow lessees to sublease the item or assign their lease, unless there is a serious reason not to.
End of the lease
Return the item in good condition at the end of the lease.
Good condition means with only normal wear and tear.
Take back the item at the end of the lease.
The owner can claim money if you return an item that is damaged. Important: there are exceptions!
Lessees have options if the owner does not fulfill their responsibilities. And vice-versa: owners also have options if lessees don’t fulfill their responsibilities. Either one can ask the court to:
- order that the other person fulfill their responsibilities,
- reduce the amount of the rent,
- order the other person to pay them compensation,
- end the lease (only if the other person’s behaviour causes serious damage).
|
Did you know? If you’re asking for $15,000 or less, you must file your application with the Small Claims Court. |
Leasing for 4 months or more
Lessees and owners who lease an item for 4 months or more have the same general responsibilities as those who lease an item for a shorter period. But that’s not all!
The law offers additional protections to lessees who sign a lease of 4 months or more. Lessees who lease an item long term are considered consumers. That means they are protected under the Consumer Protection Act. As for owners, they are considered merchants, which means they have additional responsibilities.
Lessees and owners who sign a lease of 4 months or more have their additional rights and responsibilities described in the following sections.
Other rules apply if you lease a used car or motorcycle.
Lease with guaranteed residual value
Your lease of 4 months or more may contain a guaranteed residual value clause.
With such a clause, you promise the owner that the item will have a certain value at the end of the lease. Put otherwise, you promise that the item won’t be worth less than what you agreed on with the owner. If the item is worth less than the residual guaranteed value, you must pay the owner the lesser of the following two amounts:
- the difference between the guaranteed residual value and the market value of the item (calculated at the end of the lease), or
- 20% of the guaranteed residual value.
For example, let’s say you lease a log splitter for 2 years. Your lease sets the guaranteed residual value at $300. At the end of the lease, you return the log splitter and its market value is $250. The difference between the value you guaranteed ($300) and the value of the item at the end of the lease ($250) is $50. You must pay the owner $50, since this amount is less than 20% of the guaranteed residual value ($60).
Lease with an option to purchase
Your lease of 4 months or more may contain an option to purchase clause.
An option to purchase clause gives you the option to purchase the item and become its owner at the end of the lease. You’d pay the price that was set in advance in the lease (the “buyback price”).
For example, let’s say you’d like to use the latest model of snowshoes for the winter season. But you hesitate to buy them because you don’t know if you’re going to like them. So, you decide to lease a pair with the option to purchase, which will allow you to buy the snowshoes at the end of the season if you’re happy with them.
Written lease
The owner must provide you the lease in writing when it contains a guaranteed residual value clause or an option to purchase clause.
Rent
The rent is the price you pay to lease the item.
When you pay the rent for an item for 4 months or more, you are entitled to:
- pay in equal instalments (except for the last one, which may be lower than the others), and
- pay the instalments at regular intervals of a maximum of 35 days.
The owner can require you to pay up to two instalments in advance (but only before the start of the lease period).
If you don’t pay your rent on time, the owner can ask you to do one of the following:
- pay past unpaid instalments,
- return the item to them, without reimbursing you for payments you’ve already made,
- pay all the installments set out in the contract (that is, past unpaid instalments + all future instalments), if this option is specified in the lease.
Ending the lease
You can end the lease at any time before its term.
The owner will take back the item. They won’t give you back the instalments you already paid. You may have to compensate the owner for damages caused by ending the lease early.
Insurance: protecting the item
Think about insuring the item you’re leasing! Having insurance means you could receive money if there’s damage to your items.
The owner of the item could require you to insure the item for loss and damages resulting from an incident other than superior force.
Verify if the item you leased is already insured under your home insurance policy before taking out another insurance. You don’t need to take out additional insurance if the item is covered by your home insurance. Note that home insurance policies may cover items, but this is not automatic. Be sure to check what’s included and excluded from your insurance policy.
The item you’re leasing isn’t already insured? You have several options, depending on the duration of your lease:
- Your lease is less than 4 months? The owner can require you to choose a specific insurance policy. Otherwise, you can take out the insurance policy of your choice. You can also ask your insurer to add additional coverage to your existing home insurance policy.
- Your lease is 4 months or more? The owner cannot require you to choose a specific insurance policy. You can take out the insurance policy of your choice, including the one offered by the owner. You can also ask your insurer to add additional coverage to your existing home insurance policy.