Lessor vs Lessee
A business owner who requires a specific asset has two options to obtain the asset; he can either purchase it or lease the asset. Leasing an asset can be more economical than purchasing it, as a lease is like renting an asset and using it over the period of time that for which it is required. A lease agreement lays out the use/rent of an asset over a specific period. There are two parties to a lease agreement, known as the lesser and lessor. The article below explains the terms and highlights their similarities and differences.
Lessor
A lessor is the legal owner of the asset and is the party that allows the lessee to use the asset for a specific period of time, for a set amount of rent. During the term of the lease agreement, the lessor will own the asset and is also entitled to any financial benefit that may be realized if the asset is sold. The lessor is also entitled to the periodic rental payments and must be compensated for any losses if the lessee causes any damage to the asset.
When the asset is leased, the lessor will have limited rights over the asset. For example, for a leased apartment the lessor will have limited entry for specific maintenance or repair purposes. The lessor will also have to provide the lessee prior notice before the apartment is accessed by them. The lessor holds the right to evict a tenant or repossess the asset in the event that there is any illegal use of the asset or intentional damages caused.
Lessee
A lessee is the party that is entitled to use the asset as per terms stated in the lease agreement for a specific period of time, by paying an agreed upon periodic payment. The duration for which the asset is leased can depend upon the purpose for which the asset is used. For assets such as apartments, the term would generally be longer, and short term leases can be taken out for specific equipment/machinery that is needed for a few days. Once the asset has been leased to the lessee, it is the lessee’s responsibility to use the asset with care. At the time the asset is returned back to the lessor, the lessor will inspect the asset for any losses; and the lessee can be charged for damages as per the terms in the lease contract.
Lessor vs Lessee
A lease is an arrangement in which one party owns an asset that is used by another party for a specific period of time, as per terms on a lease contract in exchange for a periodic rental payment. There are two parties to the lease, known as the lessor and the lessee. The lessor is the owner of the asset that rents the asset. The lessee is the party that uses the asset over a specific period of time and pays a rental in exchange for the asset use.
Summary:
Difference Between Lessor and Lessee
• A lease agreement lays out the use/rent of an asset over a specific period. There are two parties to a lease agreement, known as the lesser and lessor.
• A lessee is the party that is entitled to use the asset as per terms stated in the lease agreement for a specific period of time, by paying an agreed upon periodic payment.
• A lessor is the legal owner of the asset and is the party that allows the lessee to use the asset for a specific period of time, for a set amount of rent.