Q.What is Contract Rent?

Contract rent is the money a tenant actually agrees to pay the landlord, under a contract, for the use of land or property for a stated period. It covers land plus buildings, fixtures and improvements, and differs from economic rent, which is the payment only for the original powers of land.

Meaning

Contract rent is the rent that is actually paid by the hirer or tenant to the owner of land or property according to a contract or agreement entered into between them for a certain period. It is the rent determined by the terms settled between the landlord and the tenant.

Features

• It is based on an agreement/contract and is a market payment.
• It includes payment not only for the bare land but also for buildings, fixtures, fences and improvements made on the land.
• Its amount depends on demand and supply conditions and on the bargaining between the two parties.

Difference from economic rent

…

Contract Rent is the payment actually made by a tenant to the owner as fixed under an agreement (contract) for the use of land, a building or any other asset for a stated period. It is the market/agreed rent and usually includes more than pure economic rent: it also covers interest on the capital the owner has invested (buildings, fencing, irrigation), and charges for repairs, maintenance and other services. It is contrasted with economic rent, which is the payment for the use of land in its original, indestructible form only.

Meaning of Contract Rent

Contract rent is the rent that a tenant actually agrees to pay the landlord under a contract for the use of land or property for a certain period of time. It is the rent settled by mutual agreement between the two parties and recorded in the lease or contract.

Contract rent is generally larger than pure economic rent, because besides the payment for the use of land itself it also includes:

1. Interest on the capital invested by the owner in improvements such as buildings, wells, fencing and irrigation.
2. Charges for repairs, maintenance and other services provided by the owner. …