Lessor definition
/What is a Lessor?
A lessor is the owner of leased property. The lessor allows a lessee to use the property in exchange for periodic rental payments. These payments are usually made in accordance with a monthly payment schedule, but may also be paid out in a lump sum. A leasing arrangement is defined in a lease agreement, which can include a number of special terms, such as the ability of the lessee to extend a lease or to buy the leased asset at a bargain price.
Examples of Lessors
Here are several examples of lessors, operating within different businesses:
Property lessor. A lessor might rent out a commercial property, residential property, or a vacation home.
Equipment lessor. A lessor might rent out vehicles, construction equipment, or office equipment.
Technology lessor. A lessor might rent out its software as a service, or a lessor might lease out server space.
Transportation lessor. A lessor might rent out aircraft, ships, or railcars.
Terms Similar to Lessor
A lessor is known as a landlord when real property is being leased.
Related AccountingTools Course
FAQs
What Risks Does a Lessor Face?
A lessor faces the risk that the lessee may default on lease payments, leading to potential financial loss. There is also the risk of physical damage, excessive wear, or obsolescence of the leased asset, which could reduce its value. Additionally, market or regulatory changes may affect the asset’s profitability or the enforceability of lease terms.
Related Articles
Accounting for a Capital Lease