A lessee is an individual or company that leases property from a lessor. You’ll often find this with a rental property like an apartment. Lessees aren’t constrained to homes—you can also find leases for land, commercial buildings, vehicles, or other property.
Let’s take a look at what a lessee is, how being a lessee works, and the difference between lessees and lessors.
Definition and Examples of Lessees
A lessee is a person or business that leases property, such as an apartment, from a lessor, who owns the property. If you’ve ever rented a home, leased a vehicle, or borrowed someone else's property for your use, you have likely been a lessee.
Lessees sign an agreement with a lessor that lays out the terms of the agreement to rent the property. That typically includes the cost to lease the property, how the payments will be made, how often the lessor will be paid, and the length of time the lessee will have access to the property (a start and end date).
When you sign a lease with another party it becomes legally binding—you’ll need to keep whatever terms you’ve agreed to in the lease. In addition to costs and term lengths, a lease contract often outlines details for maintaining a property and the consequences for not following the terms of a lease. If a lessee does not abide by the terms in a lease, the lessor may have grounds for breaking it or imposing penalties.
- Alternate names: Tenant, renter
Both individuals and companies can be lessees. If Amazon signs a lease for warehouse space, then Amazon would be the lessee of that property, and the developer or building owner would be the lessor.
How the Lease Agreement Works
Leases are common for both personal and commercial property that has tenants. If you are the tenant, you’re the lessee and the lessor, or property owner, is your landlord.
The lease agreement outlines the rights and responsibilities of the lessor and lessee. It details the consequences if either party does not comply with the terms and conditions. That often includes penalties and fees for the lessee, or the possibility of eviction or repossession if, say, payments are not made. The lease is then reviewed and then signed by both parties, perhaps with the attorney help of an attorney.
Commercial leases, which are for property used for commercial instead of residential purposes, can be more complicated than personal property leases. They may include longer terms, rent tied to profit, or other factors rather than a set rental cost.
You have likely been a lessee if you’ve rented an apartment or home. In that case, you would have found the property and applied. If the lessor approved you, you would review and sign their lease, which would also include their signature.
You may have a lease, for example, that is for one year, with the possibility of paying month-to-month at the end of the term. Many leases call for a security deposit that is held by the lessor to cover damages or failure to pay rent.
Failure to uphold the lease as a lessee can have legal consequences, including the forfeiture of a security deposit or even eviction.
A lease may give you the responsibility of maintaining the lawn and avoiding damage to the property. In the case of rental properties, it can hold the lessor accountable for keeping the heat or air conditioning working, repairing appliances, providing running water, and providing adequate weatherproofing.
Lessees vs. Lessors
Lessees and lessors are the two main parties in a lease agreement. Here’s how they compare:
|Rents property such as an apartment||Owns property to rent to others|
|Signs a lease||Creates and signs a lease|
|Pays lessor according to lease terms||Collects payments from lessee|
|Legally responsible for lease terms||Legally responsible for lease terms|
Essentially, the main difference between lessors and lessees is ownership of property. The lessor maintains legal ownership of the property, whether it is a car from a car dealership or the property of a landlord.
The lessee, meanwhile, may occupy or physically possess the property during the lease term, but they never own it. Once the lease has ended, the lessee is obligated to give back the property that they’ve rented to the lessor.
Although lessors have legal ownership of their property, they cannot enter or access it whenever they’d like. Tenant laws require that a landlord give reasonable notice to a lessee before entering a property. This is usually between 24 and 48 hours.
- A lessee is a person who rents, or leases, property from a lessor.
- Lessees have a legal obligation to maintain the terms of their leases, including payment terms.
- Leases are common for several types of property, including land, commercial buildings, homes, and vehicles.