Difference Between Lessor and Lessee

The process of leasing is very simple. It begins with the lessor giving his asset or property to the lessee. Then the lessee pays monthly agreed-upon lease or rent to the lessor. After the contract, the lessee returns the asset to the lessor. The lessor is the property owner and does not use it for its use; on the other hand, the lessee temporarily acquires the property and uses it for its use. The lessor can be an individual or an entity; the assets leased can be a building, vehicle, or even Industrial equipment and business equipment. The lease assets can also be intangible properties like computer software.

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  • A lessor is an individual or an entity who rents his property or asset to another individual or entity. The lessor can be used as a synonym for the owner or landlord. One key point to remember is that the lessor is responsible for repairs the lessee does not causeA lessee can be considered a synonym for a renter or a tenant. In financial terms, a lessee Lessee A Lessee, also called a Tenant, is an individual (or entity) who rents the land or property (generally immovable) from a lessor (property owner) under a legal lease agreement. read more is a person we rent or loan something to. In return for this, the lessee pays rent or leaseLeaseLeasing is an arrangement in which the asset’s right is transferred to another person without transferring the ownership. In simple terms, it means giving the asset on hire or rent. The person who gives the asset is “Lessor,” the person who takes the asset on rent is “Lessee.”read more.

Lessor vs. Lessee Infographics

Key Differences

The key differences are as follows –

  • The lessor is the owner and has the right to transfer the asset to anyone. However, the lessee is the temporary owner, who lies to the extent of the contract and the agreed payment.Possession is in the hand of the lessee while the ownership lies with the lessor.If the lessee gets bankrupt, the lessorLessorA lessor is an individual or entity that leases out an asset such as land, house or machinery to another person or organization for a certain period.read more has the right to get the payments first. The lessee has no relation to the bankruptcy of the lessor since he does not owe the lessee any money.Lessee has restrictive control over the property or the asset. Since the lessor is the owner, there is no restriction on him for property usage. However, permission is required when the property is under-lessee.The compensation paid to the lessor is the amount of lease or rent. However, the benefit to the lessee is the temporary use of the asset without having to invest the entire sum of money.The lessor can terminate the contract in case any damage is done to his property by the lessee or in case the lessee breaks any clause of the contract. The lessee can also terminate the contract in case of an unknown event like a flood or fire.As the asset owner, the lessor has the absolute right to take the asset or property from the current lessee and lend it to another lessee. However, this privilege is not given to the lessee. He does not have the right to give anyone else to use the property.

Comparative Table

Conclusion

The contract, calculations of the lease, and valuation of the property all depend on the type of lease. It can either be an operating leaseOperating LeaseAn operating lease is a type of lease that allows one party (the lessee), to use an asset held by another party (the lessor) in exchange for rental payments that are less than the asset’s economic rights for a particular period and without transferring any ownership rights at the end of the lease term.read more or a financial lease.  The lesser and the lessee are the two main parties of the contract which come together and form an agreement.

All the businesses today have some lease paymentsLease PaymentLease payments are the payments where the lessee under the lease agreement has to pay monthly fixed rental for using the asset to the lessor. The ownership of such an asset is generally taken back by the owner after the lease term expiration.read more. Organizations find it feasible to take assets or property on the lease because they do not have to invest the entire amount of money and can still benefit from the entire asset.

This has been a guide to Lessor vs. Lessee. Here we discuss the top 12 differences between lessor and lessee, infographics, and a comparison table. You may also have a look at the following articles –

  • Capital Lease CriteriaLeasehold vs. FreeholdTriple Net LeaseCapital Lease vs. Operating Lease