Lessor vs Lessee

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When it comes to the world of leasing, there are two main players: the lessor and the lessee. It is not limited only to real estate, an airplane or car can be leased, too. Each party has its rights and responsibilities that they need to know and understand. It can be a great business idea if you have any of the assets to lease out. It can be a great source of income and quite simple, too. In this article, we will be talking about the Lessor and the Lessee and what are the differences between them.

Who is a Lessor

A lessor is a person or company who provides an asset to be leased. He gives someone the right to use the said asset in return for rent, which is usually determined by a leasing agreement. The lessor can charge one flat rate or he can charge different rates depending on how much of the asset is being used.

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For example, if the lessee is only using one room in a house, he will be charged according to that. It can even be rented out for an hourly rate if the lessee wants to do so.

Who is a Lessee

A lessee, on the other hand, is someone who rents assets from lessors. He has no control over the asset itself but only has the right to use it for a certain period of time. He pays different types of rent depending on how he uses the asset and according to another agreement

When you take a look at real estate leasing, there are times when lessors rent their properties as well. This is done through land contracts. It is like buying a house in cash, but you have to pay it off gradually. You get the title after everything has been settled.

Key differences between Lessor and Lessee

Here are some of the key differences between a lessor and a lessee

  1. The lessor is basically the one who has control. The lessee only borrows the said asset for a certain period of time. If he wants to continue using it, he needs to sign another agreement or rent again after his agreed period has ended.
  2. The lessor pays for regular repairs or any changes to the said asset. The lessor usually adds the maintenance cost to the rent. The lessee only pays for the actual use of the asset and if he has to make any additional changes.
  3. The lessor can terminate the contract if there is any violation of the terms, the lessee doesn’t pay his rent or the lessee damages the said asset. The lessee can terminate it too, but there may be a penalty depending on the contract
  4. If the lessee gets bankrupt, the lessor has the right to get their money first. This is because they do not owe any money to the lessee. But there is nothing the lessee can do if the lessor gets bankrupt.

Conclusion

Both the Lessor and Lessee have their own rights and responsibilities. It is all dependent on what type of leasing agreement they’ve signed with each other. The key to a successful business lies in the terms and conditions of the agreement as well as good communication between both parties.

Further questions

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