What Is a Lessor?
A lessor is essentially someone who grants a lease to someone else. As such, a lessor is the owner of an asset that is leased under an agreement to a lessee. The lessee makes a one-time payment or a series of periodic payments to the lessor in return for the use of the asset.
Key Takeaways
- A lessor is the owner of an asset that is leased, or rented, to another party, known as the lessee.
- Lessors and lessees enter into a binding contract, known as the lease agreement, that spells out the terms of their arrangement.
- While any sort of property can be leased, the practice is most commonly associated with residential or commercial real estate—a home or office.
- The lessor may be a company or an individual depending on who or what entity owns the building.
- Depending on the circumstances, “landlord” can be another name for a lessor.
Understanding Lessors
A lessor can be either an individual or a legal entity. The lease agreement they enter into with another party is binding on both parties and spells out the rights and obligations of both the lessor and the lessee. In addition to the use of the property, the lessor may offer special privileges to the lessee, such as early termination of the lease or renewal on unchanged terms, solely at their discretion.
For a lessor, the main advantage of entering into a lease agreement is that they retain ownership of the property while generating a return on their invested capital. For the lessee, periodic payments may be easier to manage than the total purchase price of the property.
Types of Leases and Lessors
While leases are usually associated with real estate—a rented residence or office—almost any asset can be leased. This includes tangible property such as a home, office, car, or computer, and intangible property like a trademark or brand name. The lessor in each instance is the owner of the asset.
For example, in the case of real estate or a car, the lessor is the property owner or automobile dealer respectively; in the case of a trademark or brand name, the lessor is the company that owns it and has conferred the right to use the trademark or brand name to a franchisee. When used in connection with the motor carrier industry, a lessor refers to the owner of a commercial motor vehicle who contracts with the entity that holds operating authority for the use of the vehicle.
Some lessors can also grant a “rent-to-own” lease whereby some or all of the payments made by the lessee will eventually convert from lease payments to a down payment on the eventual purchase of the leased item. This arrangement is typical in commercial contexts, such as when leasing large industrial equipment, but it is also common in the consumer context with automobiles and even residential real estate. The lessor is also known as the landlord in lease agreements that deal with property or real estate.
Special Considerations
The most common type of lease is for homes or apartments where individuals and families live. Due to the importance of housing, many jurisdictions have bodies that regulate and oversee the legal relationships and acceptable terms of leases between lessors and lessees.
For example, in the state of New York, the New York State Division of Housing and Community Renewal (DHCR) is responsible for administering rent regulation in the state, including New York City, which includes both rent control and rent stabilization.
Is a Lessor a Landlord?
A lessor may be called a landlord. A lessor is a person or legal entity that owns a property and rents it out to a lessee, who, in turn, pays the lessor to live on their property.
Who Is the Lessor in a Lease Agreement?
The lessor in a lease agreement is the person or legal entity that grants a lease to an individual or family, often a lease on a property. The lessor is the owner of the asset in the lease agreement.
Who Is the Lessee in a Lease Agreement?
A lessee is the person or legal entity leasing the asset provided by the lessor. A lessee in a lease agreement is responsible for making payments to the lessor for using the asset named in the lease agreement, such as an apartment or a storefront.
Related Terms: lease, lessee, rent, landlord, rent-to-own.
References
- New York State. “Division of Housing and Community Renewal”.
