James Chen, CMT is an expert trader, investment adviser, and global market strategist.
Updated April 23, 2022 Fact checked by Fact checked by Suzanne KvilhaugSuzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands.
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.
A lessor can be either an individual or a legal entity. The lease agreement that they enter into with another party is binding on both the lessor and the lessee and spells out the rights and obligations of both parties. In addition to the use of the property, the lessor may grant 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 the ownership of the property while generating a return on their invested capital. For the lessee, periodic payments may be easier to finance than the total purchase price of the property.
In the public's mind, leases are usually associated with real estate—a rented residence or office. But actually, almost any sort of asset can be leased. It can be tangible property such as a home, office, car, computer, or 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 be converted from lease payments to a down payment on the eventual purchase of the leased item. This type of arrangement usually occurs in a commercial context—when leasing large industrial equipment, for example. But it is also common in a consumer context with automobiles, and even with residential real estate.
The lessor is also known as the landlord in lease agreements that deal with property or real estate.
The most common type of lease is for homes or apartments in which individuals and families live. Because housing is an important matter of public policy, many jurisdictions have created governing bodies that regulate and oversee the legal relationships and acceptable terms of leases between lessors and lessees in this field.
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. This responsibility includes both rent control and rent stabilization.
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 term pays the lessor to live in their property.
The lessor in a lease agreement is the person or legal entity who 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.
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 a payment or payment to the lessor for using the asset named in the lease agreement, such as an apartment or a storefront.