Q.Write a short note on: Contract rent

Contract rent is the actual amount a tenant agrees to pay the owner for the use of land or property under a contract. It covers the use of the land plus the buildings, improvements and capital on it, and therefore differs from pure economic rent, which is the payment for the use of land alone.

Meaning

In economics the term rent is used in two senses: economic rent and contract rent. Contract rent is rent in the popular, everyday sense.

Contract rent is the payment actually made by a tenant to the landlord for the use of land, a house or other property, according to an agreement or contract entered into between the two parties for a certain period and at an agreed amount.

Explanation

Contract rent is fixed by mutual agreement and may be influenced by the bargaining power of the two parties, the duration of the contract and the prevailing conditions. Importantly, it is a payment not only for the original and indestructible powers of the soil (pure land), but also for the buildings, fences, wells and other improvements made on the land and the capital invested in it.

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