How it started

The history of rental relations counts more than 4 thousand years. It’s rich and diverse like the history of mankind. However, to our surprise, the bases of rental relations of those years have much in common with what seems new to us nowadays. We suggest you to make a small survey upon the evolution of these relations and take a look at the key phases of their development.

First deal

Nobody in the world knows the exact date of the first rent deal. However, the first material evidence of similar activity dates back to the 2000 B.C. During the excavations, that took place in 1984 where the Sumerian city of Ur had been located, the scientists managed to find the prototypes of the first rental contracts. These were clay tablets, where the parties of the contract ser down their obligations upon the passing of agricultural inventory and the right of well usage for a certain time period and for a certain payment. The clay tablets showed to the scientists that priests were the first lessors living in the temples of Ur.

First rental company

Scientists have found evidence that between 400 and 450 B.C. approximately, to the southeast of Babylon, in the ancient city of Neppur, the first rent company in the human history was opened by the family of Murashu. The family was an unsurpassed leader at the market of rental services in the Persian Empire. They specialized in land rent, offering also a wide range of additional products such as: cattle rent, the rent of agricultural equipment and installment selling of sowing materials.

Rent in the middle Ages

In 1066 England was invaded by the Norwegian king and a Norman duke. The two fleets reached the costs of England two weeks after the military campaign had been initiated. But the fact was that neither the Norwegian king nor the Norman duke had enough ships. They also didn’t have enough money and time to build their fleets and to finance such a military campaign, which was very serious for those times. The English had only one explanation of the phenomenon – the divine nature of the events. In fact, everything was much more simpler: the two leaders had found a source of financing: they had rented the fleets, crews and arms and successfully realized their “business plans”.

In the Middle Ages the rent of houses and agricultural equipment was popular. It was also popular the rent of knight’s amour, that cost too much. For example, in 1248 the knight Bonfils Manganelly from Gaeta, when preparing for the seventh crusade, hired a complete suit of amour. The rent interests made 25% from the trade price of the suit.

Increase of rental relations in the 19th century

In the 19th century a considerable increase of rental relations is observed by reason of variety of rent items, used in society. An impetuous development of technology in agriculture, industry and transportation has made the rent very relevant and important in the entrepreneurial sphere. For instance, the companies that built railways rented to those who dealt with the locomotives the right to use their rails and sleepers. The locomotives in their turn were rented to the auto transport companies.

It was the impetuous development of railways that gave a big impulse for the development of rent in the USA. Together with the boom of railways construction the so-called “equipment trusts” began to be built. They attracted investors and invested their money in buying locomotives and adequate technical equipment. These locomotives and technical equipment in their turn were rented to marine companies and also to railway enterprises, cargo carriers and carriers of passengers. Private investors were given special certificates, according to which they could receive the invested money back with interest.

Rent in the first half of the 20th century

Together with the technological progress the rent was becoming more important in the 20th century. But now the new impulse in its development was given by the interest of equipment producers themselves to the rent as the instrument of selling. As early as at the beginning of the century the equipment producers understood that it was almost impossible to find means for the production of expensive equipment. The majority of equipment producers considered the rent which conserved the property right to the lessor during the contract period to be a good method of conserving the right over property and technology, which formed the basis of equipment production. The company of Bell, that already in 1877 announced its decision about renting its equipment, can serve an example. Analogical cases took place also in other spheres until antitrust legislation was adopted and equipment producers were obliged to sell their products.

With the development of the automobile industry the rent formed an essential part of life in the USA and in the European countries. The first deals of automobile renting date back to 1918. However, the father of the present auto leasing is considered to be Zolly Frank from Chicago, who at the beginning of the 40’s was the first to suggest a long-term rent of car parks instead of single cars.

Birth of lease

The date of the lease birth is considered to be the year of 1954, when ordinary rent got some additional feature, that further gave a gigantic increase of this sector in developed European countries. It’s a matter of accelerated amortization of the rent assets with the purpose of its lessee’s taxation.

As a matter of fact, all the history of lease in the west shows that the accelerated amortization for taxation purposes is one of the main features that distinguishes rent from lease. The rent together with the accelerated amortization allows lease companies to transfer the benefit from accelerated amortization to leessee, which reduces financial rent.

In the majority of cases the rent consisted of a right or an obligation of the lessee to purchase the asset at the end of the contract term. On one hand accelerated amortization allows to optimize the taxation for the lessor during the contract term, on the other hand, the lessee when buying out the asset didn’t have additional taxation, because the equipment was practically totally amortized. It was the institution of the accelerated amortization that formed the basis of lease and also made it competitive in comparison with regular rent and credits.