The words lessor and lessee are legal terms used to indicate parties to a lease agreement. A lease is a legal document that governs renting property. Before you enter into a lease contract, you should be aware of the importance of being either a lessor or a lessee. This is true whether you are either a landlord or a tenant.
Being a lessor or a lessee comes with specific roles, rights, and responsibilities. You need to know which side of the contract you are on and which word defines your role. For example, understanding which party you are in the relationship will help clear up any confusion about the legality of paying to fix a particular problem.
No matter where you are located, knowing the key differences between a lessee and a lessor is essential. By signing a lease, you acquire rights but also accept legal responsibilities. Before signing any rental agreements, educate yourself about the law and the roles of being a lessee or a lessor.
What Is a Lessee and a Lessor?
The legal terms lessee and lessor refer to each side of a legal contract known as a lease. One party rents the assets agreed upon in the lease while the other owns the assets and accepts money in exchange for access to the property.
The following definitions will focus on residential leases. A residential lease is a typical agreement between a landlord and a tenant governing the use of an apartment or other real estate. A couple of different lease types will then be described in more detail near the end of the article.
Lessee
The lessee is the person who, through a lease, acquires the right to use the property. In a residential lease, a lessee is the tenant. Also known as the renter, the lessee pays money (rent) on scheduled dates to grant them access to the property.
One main advantage of being a lessee is lower upfront costs. Sticking to a residential lease, the lessee does not own their home but instead pays their landlord for its use. There is no large down payment or mortgage agreement for their unit. This can help people with shaky financial backgrounds, such as bankruptcy, find housing.
A primary disadvantage for a lessee is the lack of certainty. A tenant may need to move every time their lease expires. They also do not receive any income from the property nor any gains from the asset’s appreciation.
Lessor
In a lease, the lessor is the party who owns the property and allows the lessee to access and use the unit in exchange for rent. In a residential lease, a lessor is the landlord. Lessors maintain ownership rights but their ability to access the asset is limited by the lease.
By renting their unit, the lessor receives income. This is the primary advantage of being a lessor. However, the landlord is taking the risk that the tenant will damage their property. Additionally, by signing a lease, the landlord cannot rent the property for a higher amount until the contract term expires.
What are the Differences Between Lessor and Lessee
There are significant differences between being a lessor and a lessee. For clarity, refer to the following table:
| Key Differences between Lessors and Lessees | |
|---|---|
| Lessee | Lessor |
| Rents the asset or property from the lessor. | Owns the asset or property and rents it to the lessee. |
| Receives use of the asset, such as being able to live in an apartment. | Receives money in exchange for allowing the lessee to use the property. |
| Has legal status as a tenant but no ownership of the asset. | Maintains ownership rights in the asset but only has limited access based on local landlord-tenant law. |
| Does not have an investment in the property. | Can realize investment gains if the value of the property increases. |
| Can restrict entry to the unit, with some exceptions. | Cannot enter the unit unless following the law and terms of the lease. |
| Does not have to pay property taxes on the asset. | Pays property taxes on the asset. |
| Is responsible for the daily upkeep of the asset but not for major repairs. | Must repair or replace any major parts of the property if they fail or break. |
| Pays for monthly utilities such as electricity, gas, and internet unless otherwise specified in the lease. | Does not need to pay for monthly utilities unless included in the terms of the lease agreement. |
Types of Lease Agreements
Beyond residential leases, where a landlord and tenant play the parts of lessor and lessee, there are various other lease agreements. In every lease, the lessor owns the asset while the lessee rents the asset.
In a consumer lease, the owner of a piece of personal property rents it to a user. Imagine a laptop. If you have two working computers, you may only use one. But your friend does not have a laptop and needs one. You can agree to lease the laptop to them for $20 every month. In this example, you are the lessor because you own the item, and your friend is the lessee.
Another specific type of lease is the finance lease. These are more complex financial instruments used by investors and banks to distribute the risk of a product. The lessor owns the financial product, such as a stock, and rents it to the lessee. The lessee may pay the owner a rental sum in exchange for any positive returns the stock gains in the market.
If you are looking to lease property, whether residential or consumer, LawDistrict.com has all the real estate forms you need in our simple contract maker.
Helpful Resources:
Lessee - Legal Information Institute (LII)
Lessor - Legal Information Institute (LII)
The words lessor and lessee are legal terms used to indicate parties to a lease agreement. A lease is a legal document that governs renting property. Before you enter into a lease contract, you should be aware of the importance of being either a lessor or a lessee. This is true whether you are either a landlord or a tenant.
Being a lessor or a lessee comes with specific roles, rights, and responsibilities. You need to know which side of the contract you are on and which word defines your role. For example, understanding which party you are in the relationship will help clear up any confusion about the legality of paying to fix a particular problem.
No matter where you are located, knowing the key differences between a lessee and a lessor is essential. By signing a lease, you acquire rights but also accept legal responsibilities. Before signing any rental agreements, educate yourself about the law and the roles of being a lessee or a lessor.
What Is a Lessee and a Lessor?
The legal terms lessee and lessor refer to each side of a legal contract known as a lease. One party rents the assets agreed upon in the lease while the other owns the assets and accepts money in exchange for access to the property.
The following definitions will focus on residential leases. A residential lease is a typical agreement between a landlord and a tenant governing the use of an apartment or other real estate. A couple of different lease types will then be described in more detail near the end of the article.
Lessee
The lessee is the person who, through a lease, acquires the right to use the property. In a residential lease, a lessee is the tenant. Also known as the renter, the lessee pays money (rent) on scheduled dates to grant them access to the property.
One main advantage of being a lessee is lower upfront costs. Sticking to a residential lease, the lessee does not own their home but instead pays their landlord for its use. There is no large down payment or mortgage agreement for their unit. This can help people with shaky financial backgrounds, such as bankruptcy, find housing.
A primary disadvantage for a lessee is the lack of certainty. A tenant may need to move every time their lease expires. They also do not receive any income from the property nor any gains from the asset’s appreciation.
Lessor
In a lease, the lessor is the party who owns the property and allows the lessee to access and use the unit in exchange for rent. In a residential lease, a lessor is the landlord. Lessors maintain ownership rights but their ability to access the asset is limited by the lease.
By renting their unit, the lessor receives income. This is the primary advantage of being a lessor. However, the landlord is taking the risk that the tenant will damage their property. Additionally, by signing a lease, the landlord cannot rent the property for a higher amount until the contract term expires.
What are the Differences Between Lessor and Lessee
There are significant differences between being a lessor and a lessee. For clarity, refer to the following table:
| Key Differences between Lessors and Lessees | |
|---|---|
| Lessee | Lessor |
| Rents the asset or property from the lessor. | Owns the asset or property and rents it to the lessee. |
| Receives use of the asset, such as being able to live in an apartment. | Receives money in exchange for allowing the lessee to use the property. |
| Has legal status as a tenant but no ownership of the asset. | Maintains ownership rights in the asset but only has limited access based on local landlord-tenant law. |
| Does not have an investment in the property. | Can realize investment gains if the value of the property increases. |
| Can restrict entry to the unit, with some exceptions. | Cannot enter the unit unless following the law and terms of the lease. |
| Does not have to pay property taxes on the asset. | Pays property taxes on the asset. |
| Is responsible for the daily upkeep of the asset but not for major repairs. | Must repair or replace any major parts of the property if they fail or break. |
| Pays for monthly utilities such as electricity, gas, and internet unless otherwise specified in the lease. | Does not need to pay for monthly utilities unless included in the terms of the lease agreement. |
Types of Lease Agreements
Beyond residential leases, where a landlord and tenant play the parts of lessor and lessee, there are various other lease agreements. In every lease, the lessor owns the asset while the lessee rents the asset.
In a consumer lease, the owner of a piece of personal property rents it to a user. Imagine a laptop. If you have two working computers, you may only use one. But your friend does not have a laptop and needs one. You can agree to lease the laptop to them for $20 every month. In this example, you are the lessor because you own the item, and your friend is the lessee.
Another specific type of lease is the finance lease. These are more complex financial instruments used by investors and banks to distribute the risk of a product. The lessor owns the financial product, such as a stock, and rents it to the lessee. The lessee may pay the owner a rental sum in exchange for any positive returns the stock gains in the market.
If you are looking to lease property, whether residential or consumer, LawDistrict.com has all the real estate forms you need in our simple contract maker.
Helpful Resources:
Lessee - Legal Information Institute (LII)
Lessor - Legal Information Institute (LII)
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