What is a Lessor?

A lessor, in its simplest expression, is 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.

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Lessor

Understanding a Lessor

A lessor can be either an individual or a legal entity. The lease agreement that he, she or it enters 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 his or her discretion.

For a lessor, the main advantage of entering into a lease agreement is that he or she retains the ownership of the property while generating a return on his invested capital. For the lessee, periodic payments may be easier to finance than the full purchase price of the property.

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.

Types of Leases and Lessors

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 either be tangible property such as a home, office, car or 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, 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.

Special Consideration for Lessors

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.