Lessor

What Is A Lessor?

A lessor is the legal owner of an asset or a property that grants a lease to another party, usually for residential or commercial purposes, that is, a home or an office.

The payments made by a lessee to a lessor could be one-time or periodic depending on the terms of the arrangement in the binding contract between both parties, known as the lease.

Leases are generally seen to be associated with real estate, either residential or commercial. Still, virtually all sorts of assets can be leased regardless of whether or not they are tangible or intangible.

Thus, you could be referring to a home, a car, office equipment, an electronic appliance, a tool/implement, construction equipment, or something intangible like a brand name or trademark. The owner in each case will still be regarded as the lessor.

A lessor can also be referred to as a landlord, especially in lease agreements that cover property or real estate.

Deeper Definition

Lessors are usually individuals or legal entities whose rights, privileges and obligations are spelled out in the lease agreement with the lessee.

The significant upside to being a lessor is the retention of ownership of the property, with returns accruing on the investment regularly.

In the case of physical or tangible property, the lessor is usually the owner or dealer. In contrast, in the case of the intangible, e.g., a trademark or brand name, the lessor is usually the company or organization that owns the franchise and confers the right of usage or operation on the franchisee.

Sometimes, a lease agreement allows a lessor to grant a ‘lease-to-own’ lease, in which case all payments made by the lessee will be converted into a down-payment for the eventual outright acquisition of the leased item. This is seen in commercial contexts during the lease of large industrial equipment or sometimes with residential properties.

In an exceptional situation known as a third-party lease, the lessor may not hold the title to the lease but will still be designated as such.

Lessor Example

When there is a rental agreement for a property, the person who grants the rent is the lessor. John decides to invest in a property that he will rent out to a tenant. Julie agrees to rent the property and make monthly payments to John. They both sign a contract and agree upon the terms. In this scenario, John is the lessor.