Lessee definition
/What is a Lessee?
A lessee is an entity that contracts to make rental payments to a lessor in exchange for the use of an asset. These rental payments are usually made on a monthly basis in accordance with the terms of a lease schedule, but may also be paid in a lump sum. The manner in which a lessee can use a leased asset may be restricted, based on the terms of the lease agreement.
A lessee may have the right to sub-lease assets to a third party, though this arrangement usually means that the original lessee continues to have a payment obligation to the original lessor.
The lessee is referred to as the tenant when real estate is being leased. When the structure of a lease is essentially debt, the lessee may instead be referred to as the debtor in the arrangement.
Examples of Lessees
Here are several examples of lessees:
Real estate lessee. A lessee might rent an apartment, office space, or warehouse from a lessor.
Equipment lessee. A lessee might rent cranes, excavators, or bulldozers from a lessor.
Vehicle lessee. A lessee might rent a car or truck from a lessor.
Technology lessee. A lessee might rent servers, processing time, or computer equipment from a lessor.
Each of these examples involves a lease agreement where the lessee gains the right to use the property or asset in exchange for payment, while the lessor retains ownership.
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FAQs
What Risks Does a Lessee Face?
A lessee risks being obligated to make lease payments even if the asset loses value or becomes less useful. They may also face penalties or additional costs for early termination, non-compliance, or damage to the asset. In long-term leases, the lessee bears the risk of market changes, such as declining rental rates or newer, more efficient assets becoming available.