What Is a Lessee?

A lessee is a person who rents land or property from a lessor. The lessee is also known as the "tenant" and must uphold specific obligations as defined in the lease agreement and by law. The lease is a legally binding document and if the lessee violates its terms he or she could be evicted.

Key Takeaways

  • A lessee is a person that rents land or property, such as a vehicle. The person or entity the lessee rents from is the lessor. 
  • Most lessees must meet certain guidelines and restrictions when using the property, such as mileage limits on leased vehicles. 
  • Lessees, also known as tenants, may have different restrictions depending on the space, as is the case with commercial and residential properties.

Understanding Lessees

Lessees that rent a property may be required to follow certain restrictions and guidelines in the use of the property or real estate they are paying to access and use. If the property is a vehicle under a lease, the lessee may need to keep their usage within certain mileage limits. The lessee could be subject to pay additional fees in the event that the mileage usage of the leased vehicle exceeds the agreed-upon limits.

Leased vehicles must also be maintained by the lessee with regular service and upkeep throughout the term of the agreement. These conditions must be met because the vehicle will be returned to the auto dealer at the end of the lease. The vehicle would then go on the market as a used car for sale. It is possible that a lessee might want to seek full ownership of the vehicle at the end of the lease if such an option is made available.

A lessee—also called a tenant—is the one that enters into a lease with a lessor, which is the owner of the property.

Special Considerations

A lessee who is a tenant of a commercial or residential property may face different types of restrictions on their use of the space. A commercial lessee could be granted certain rights to remodel the property they occupy to better suit the business that will use the space. This can include repainting of walls, adding signage associated with the company’s brand or installing equipment that will be used during the course of business.

Residential lessees may be limited or barred from any repainting of the space they occupy as tenants. They might be allowed to add nonpermanent decorations to the property. The lessee's rights include the right to privacy, the right to basic standards of habitability such as water, electricity, and heat, and the right to live in a space that complies with local building codes.

The lessor's rights include the right to screen potential tenants, the right to know and approve of who is occupying the leased unit and the right to use part or all of the tenant's security deposit to repair any damage caused to the property by the lessee. The lessor's responsibilities include complying with health and safety codes, making necessary repairs, returning a fair amount of the tenant's security deposit when the lease is terminated and providing advance notice to the tenant if it will be necessary to enter the unit.