Who Is the Lessee & Who Is the Lessor in a Contract?

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In a rental contract or lease, a lessor is the person who is offering the property and the lessee is the person who is renting it out. In many home rental agreements, that means that the lessor is the landlord and the lessee is the tenant. The same terminology applies if you are renting other items such as vehicles or tools. Check the details of your lease before you sign it, and take the time to ask questions or review it with a lawyer if there are terms you don't understand.

Lessor and Lessee Agreement

A lessor is a person or another entity who rents some kind of property out, whether it's a building, a vehicle or another item such as a tool or DVD. A lessee is a person or another entity who rents it, usually getting the right to use it for a certain amount of time.

A lessor and lessee agreement is the formal or informal contract that governs their relationship. It can also be known as a rental agreement or lease. Depending on the situation and the laws in your jurisdiction, this may be an agreement that is written out for both parties to sign or it may be an oral agreement.

What's in the Agreement?

The details of a lessor and lessee agreement can make a big difference for both parties.

When you're talking about real estate, the agreement will often govern how the renter can use the property, such as whether they can paint the walls in the property, whether they can bring pets and other animals to the property and whether and how frequently they can have guests. The agreement will often spell out who is responsible for other payments, such as utility payments for gas, water and electric service and who is responsible for different types of maintenance, potentially including appliance repair, snow removal, lawn care and cleaning of different parts of the property.

For cars, the term lease is traditionally used for longer-term agreements, and rental is more frequently used for short term arrangements, such as renting a car for errands or a short trip. In either case, the agreement will govern things like the condition in which the vehicle is to be provided and returned, responsibility for fueling and maintenance, how and when the car must be returned and how many miles the car may be driven.

Rental agreements for other items can vary drastically based on how they are to be used, but they will generally specify the condition the items are in at time of rental and should be at time of return, how long the items may be rented, who is responsible for maintenance on them during the rental and how they may be used. Some rental agreements require either the lessor, the lessee or both to carry various types of insurance to protect against damage to the property or different sorts of liability.

Understanding Your Rental Agreement

As with any contract, you should make sure you understand and fully agree with any rental agreement before you sign it. If you don't understand a term in the agreement, you can ask the other party to the agreement what it means, although you may want to consult your own lawyer for help understanding the document, negotiating changes or seeing if it is a good deal for you.

If there is a term in the rental agreement you don't like, see if the other party is willing to discuss changing it. If in doubt, you can consider waiting or searching for a similar item or property on the market with better rental terms.

Understanding Legal Restrictions on Leases

You can't necessarily just write any terms you wish into a rental agreement or lease. Depending on what is being rented, many jurisdictions impose restrictions on the legal terms that can be in such an agreement.

For example, for residential leases, many cities set restrictions on how much rent may rise from year to year and may mandate that landlords provide certain amenities, such as heat, water and minimum maintenance. Cities may also restrict how many people are allowed to live in a rental unit and may set rules about the minimum term of a lease to prevent residential buildings and apartments from being used as hotels. They may also restrict terms that allow the lessor to violate the privacy of the lessee, so rules that say a landlord can enter without a certain amount of notice may be overruled by the law.

Vehicle leases are also often regulated, including requirements that certain terms and conditions be disclosed and rules about when leases can be canceled or transferred to a new person without penalty.

Your city, state or federal government may have additional rules for other types of leases. If you're writing a lease, you may want to use a standard lease agreement for your jurisdiction, which you may be able to find through industry groups like real estate associations, or work with an expert such as a lawyer to draft a lease you can be assured is legally valid.

Terminating a Rental Agreement

Pretty much all rental agreements have provisions about when the rental ends, often with provisions about how it can be renewed to extend it for a longer period of time. For instance, you might rent an apartment or house for a year at a time or lease a car for three years.

If you're renting something, make sure you understand when you may need to return it to the lessor and under what circumstances it must be returned. If you violate these rules, you may be liable for costs to the lessor or may forfeit your security deposit if you have one.

If you're looking to extend your lease, check the existing agreement for provisions about when and how you should negotiate this. Lease renewal terms may be governed by laws where you are as well.

Understanding Rental Agreement Violations

Many contracts, including rental agreements, have specific provisions for what happens if the terms are violated. For rental agreements, this will usually govern what happens if the lessee stops paying rent or starts using the property in a way that's not allowed.

For real estate, the lessor usually must formally evict the lessee, often by going through a court process, in order to terminate the lease. Cities and states generally have rules specifying exactly what notice the landlord must give before a potential eviction and what procedures need to be followed. If an eviction isn't done correctly, it can expose the landlord to legal liability and allow the tenant to stay.

Other items, including cars, can often be repossessed by the lessor if the lease is violated. How this may happen will be governed by law and by the rental agreement itself.

Subletting a Leased Property

In some cases, the lessee on a property can go on to rent it to somebody else during the rental term. This is often called subletting or subleasing. Whether this is allowed depends on the terms of the lease and the law in your jurisdiction. Sublease agreements may refer to the lessee of the original lease as the lessor for purposes of the sublease, so make sure it is clear which parties are involved in which agreements and that the terminology is clear to everyone involved.

Some jurisdictions, such as New York City, require residential tenants to allow reasonable requests to sublease an apartment. Other rules apply in other jurisdictions to various types of property. Check the terms of your rental agreement and the law where you are.

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