Lessor vs Lessee

Difference Between Lessor vs Lessee

The lessor is the owner of the property and does not use it for its own use, on the other hand, the lessee temporary acquires the property and uses it for its own use. 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 is over the lessee return the asset to the lessor. The lessor can be an individual or an entity and 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

• A lessor is an individual or an entity who rents his property or his asset to another individual or entity. The lessor can be used as a synonym to the owner or landlord. One key point to remember is that the lessor is responsible for repairs which are not caused by the lessee
• In financial terms, a lessee is a person to whom we rent or loan something. In return to this, the lessee pays rent or lease. A lessee can be considered as a synonym to a renter or with a tenant

Lessor vs Lessee Infographics

Here we provide you with the top 12 difference between Lessor vs Lessee.

Lessor vs Lessee – Key Differences

The key differences between Lessor vs Lessee 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 and his ownership 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 then the lessor 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
• Since lessor is the owner there is no restriction on him for the property usage. However, permission is required when the property is under-lessee. Lessee has restrictive control on the property or the asset
• 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 and 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, fire.
• Being the owner of the asset, the lessor has the complete right to take the asset or the property from the current lessee and lend it to some other lessee. However, this privilege is not given to the lessee. He does not have the right to give anyone else to use the property

Lessor vs Lessee Head to Head Difference

Let’s now look at the head to head difference between Lessor vs Lessee

Particular		Lessor		Lessee
Definition		Lessor is the owner of the asset and the person who grants his assets to the lessee for lease		A lessee can also be termed as a borrower. He takes temporary possession of the property or the asset from the lessor
Compensation		In return of giving the asset to the lessee for lease, the compensation the lessor gets is the total amount of lease		Lessee gets the asset or property for temporary use and in turn, pays the lease
Status		The legal owner of the asset is the lessor		Lessee is just a borrower and does not enjoy any  legal owner status
Bankruptcy		If the lessee gets bankrupt then the lessor has the right to get the payments first		The lessee has no relation to the bankruptcy of the lessor
Owner		The real ownership remains with the lessor		Lessee is the temporary owner
Asset Possession		The lessor does not possess the asset		Lessee possess the assets
Legal  restrictions		Since lessor is the owner of the asset the number of restrictions are less		The obligations for the lessee are much higher. This is in case of damages or utilizing the asset as not mentioned in the contract
Restriction		Since lessor is the owner there is no restriction on him for the property usage. However, permission is required when the property is under-lessee		Lessee has restrictive control on the property or the asset
Taxation		As the owner of the asset, the lessor has to pay the taxes against the income and the property		Lessee is only using the asset temporarily and therefore does not have to pay the taxes
Wear and tear of the assets		As the owner, it is the responsibility of the lessor to take care of the assets and pay for the repair and maintenance		The lessee’s responsibility is limited to the time he is using the assets. The agreement also specifies regarding the repair and maintenance and the responsibility
Other utility charges		The clause for utility charges is also mentioned in the contract. However, generally, the lessor is not responsible for the payment of utility charges		Till the time the asset is with the lesse, he is responsible to pay for the utility charges
Termination of contract		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, fire.

Conclusion

The contract, calculations of the lease, valuation of the property all depends on the type of lease. It can either be an operating lease or a financial lease.  The lesser and the lessee are the two main parties of the contract who come together and form an agreement.

All the business today have some type of lease payment. 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 take benefit of the entire asset.

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