Ever heard the terms ‘lessee’ and ‘lessor’ and wondered what they actually mean? They both come from leasing; a lease agreement where one person lets another use their property in exchange for payment. For instance, if a landlord rents out an apartment, they’re a lessor making a rental agreement with a tenant (lessee). Let’s break a lessor vs. lessee down below:
Explaining a Lessor vs. Lessee
The terms lessor vs. lessee might seem the same, but they’re not quite. Lessor vs. lessee have completely different roles in a lease agreement. Our Baltimore property management experts can explain what exactly that entails:
Who is the Lessor?
A lessor is one of the most critical real estate terms. It describes someone who leases out a property or asset to someone else. For example, the lessor could be a landlord renting out an apartment, a tenant subletting their rental, a business leasing out office space, or even someone renting out equipment. Essentially, it’s someone who grants someone access to something in exchange for money or goods.
Primarily, the lessor is responsible for keeping the property in habitable condition, staying legally compliant in all property-related matters, and following the lease agreement terms. Essentially, they must take care of the property and its tenants.
Who is the Lessee?
On the other hand, the lessee is the tenant, the one who leases the property from the lessor. The lessee agrees to the lease terms and a certain rental rate they’ll pay at certain intervals. In return, they get temporary use of the space. Really, it’s just a fancy word for “tenant.”
Key Responsibilities of a Lessee
As a lessee, renting a property isn’t just about paying the rent (although that’s a fundamental part of it!) It comes with other roles and responsibilities, such as:
Handling All Assigned Maintenance Duties
Lessees are responsible for taking care of the property according to their lease terms. For example, many leases order you to clean the appliances and replace the air filters every few months. Those are typically small asks that a lessee can handle. However, big problems, like broken plumbing or structural damage, are usually the lessor or the property manager’s responsibility.
Using the Property as It’s Supposed to Be Used
As a lessee, if you lease a property, you have to use it how it was meant to be used—that’s part of the deal! For instance, it’s a home, you can’t turn it into a business space unless the lessor gives you the green light. That’s going against your lease.
Honoring the Lease Duration and Terms
The lessee is responsible for occupying the property for the lease duration they agree upon. If you end the lease early without proper notice, you may be hit with severe penalties, like forfeiting the security deposit or incurring additional fees. To the contrary, if you stay longer than your lease allows, you could be evicted. So, you must stay in for your allotted time, nothing more, nothing less.
Returning the Property to Its Original State Upon Moveout
If any modifications were made—such as structural changes for commercial use or aesthetic changes in a residential unit, like repainting or installing fixtures—the lessee is typically required to restore the property to its original state before moving out unless otherwise agreed with the lessor
Key Responsibilities of a Lessor
Now that we’ve covered the lessee’s responsibilities, let’s take a look at what the lessor needs to do. These duties are usually listed in the lease agreement, so everything is clear from the start. Let’s break it down:
Keeping the Property in Good Condition
Like we said earlier, the lessor covers the costs (and implementation) of major repairs. They make sure the property stays in proper, clean shape. But there’s a catch—if the lessee wreaks damage beyond normal wear and tear, they’ll carry the burden of these expenses. So, the lessee must do everything they possibly can to stop this from happening.
Following the Letter of the Law
The lessor also has to actively obey the law, whether it be the Fair Housing Act, the Americans with Disabilities Act, landlord-tenant laws, or federal and local building codes. So, they have to weave compliance in everything they do, from marketing to move-outs.
Establishing Lease Terms
The lessor is the one who decides on rent amount, when it’s due, and other lease terms. They should ensure the payment deadlines are clear, let you know if there are any grace periods, and explain what happens if you don’t follow the terms. This way, the lessee has no confusion or misunderstandings.
Setting Clear, Explicit Guidelines for Using the Property
As we mentioned, the lessee should use the property only for its stated purpose. Therefore, it’s on the lessor to clarify how the lessee can and cannot use the property, whether it’s daily living, business, or other purposes. Also, the lessor should specify if and when subletting is allowed. If they don’t do that, they’re practically asking for an unwanted subletter to show up on the premises.
Differences Between Lessor vs. Lessee
As we’ve seen, the responsibilities between lessors vs lessees are quite different. However, it’s also important to look at their key differences when it comes to ownership, control, obligations, and more. Let’s break them down in a table:
Aspect | Lessor | Lessee |
| Ownership | The lessor owns the property and has the right to lease it. | The lessee doesn’t own the property; they just rent it. |
| Financial Obligations | The lessor may have to juggle ongoing expenses, such as mortgage payments, taxes, and insurance. | The lessee is responsible for paying rent and any additional agreed-upon costs (e.g., utilities). |
| Legal Responsibilities | Legally, the lessor is responsible for keeping the property safe and habitable. | Legally, the lessee is responsible for following the lease terms and taking care of the property as outlined in it. |
| Risks & Insurance | The lessor takes on risks related to the property, like damage or loss. They’ll usually have insurance. | The lessor takes on risks related to the property, like damage or loss. It’s technically optional for them to get insurance, but they should have it. |
| Control Over Property | The lessor has full control and sets rules about how the property is used. | The lessee has limited control and must follow the lessor’s rules for property use. |
| Repairs & Maintenance | The lessor handles major repairs (e.g., plumbing, roofing). | The lessee takes care of minor repairs and maintenance, like sweeping the floors and cleaning the appliances. |
Common Misconceptions Around Lessors vs. Lessees
There are a lot of misconceptions about the lessee vs. lessor, especially when it comes to their responsibilities and roles. Let’s clear up some of these misunderstandings:
A Lessor is Always a Landlord:
Not necessarily! While lessors are often landlords, the term can apply to anyone who leases an asset, such as equipment, vehicles, or even intellectual property. Essentially, it’s an umbrella term.
The Lessee Owns the Asset After the Lease Expires
Generally, not true. That is, it’s not true unless the lessee is in a lease-to-own agreement. In most cases, the lessee only has the right to use the asset for the duration of the lease. That said, they can request to renew the lease when it’s over.
Lessors Have No Obligations
Wrong! Lessors have several important responsibilities, like doing basic property maintenance and following the clauses outlined in their lease. They have to stick to those, or else they are violating their lease, which could then lead to fines or even an eviction.
Need Help with Leasing? Get Professional Guidance!
Knowing the difference between lessor vs lessee can be tricky. However, it’s really simple at the end of the day: the lessor is the property/asset owner, while the lessee is the tenant. With this knowledge, you can move forward in your rental journey.
At Bay Property Management Group, we turn confusion into clarity. Whether you’re drafting your first lease, looking for the perfect tenants, or just need an expert to handle your property, we’re your go-to team. With years of experience and an in-depth understanding of local regulations, we make sure you’re always one step ahead, navigating the process with confidence and ease. Reach out to us today to gain a more passive investment.
