Renting an apartment or asset, such as a car, is an economical option for many people. But, no matter if you're the tenant or the landlord, there's so much to consider when you rent a new space.
You have to think of everything from the location of the property to the lease agreements. On top of that, there are technical terms you should know and those include lessee and lessor. You might wonder what those terms mean. Don't worry, we've got you covered! Here's what you need to know about being a lessee.
A lessee is a person or legal entity that attains the right to use an asset for a specific period of time. The lessee is also responsible for making periodic payments set by the lease agreement or lease term.
A lessee applies to the rental of a lot of things. For example, you could be the lessee of an apartment or, if it's a company, you could be a lessee of an object, such as a printer.
In almost every situation, there will be a lease agreement which is a legally binding document for the lessee to set terms during the lease period. During the duration of the lease agreement, the lessee is responsible for taking care of the leased property.
If you have ever borrowed someone else's property, rented a car or rented an apartment, you have been a lessee.
With every lease, there are two main parties — the lessee vs. the lessor. As mentioned above, the lessee is one party that's leasing from someone else. That someone else is known as the lessor.
The lessor is the person that leases to the lessee and can lease their property or any other asset they wish to lease. The lessor retains ownership over the property while it's being leased. If you're the lessor of an apartment, chances are you're also the landlord, although this is not always the case.
Because the lessor owns the property, they also retain the right to grant special privileges, including renewal of unchanged terms and early termination if the lessee breaks the lease terms or does illegal activities on the property. Also, the lessee pays rent and a one-time payment of a security deposit to the lessor.
As with anything, there are different types of lease agreements from short-term to long-term leases. You can also have a leasing agreement on anything from an item to commercial property and, of course, a residential property. And, typically, the person who owns the property or the leasing company, sets the terms of the leases.
If you're the original lessee or a new lessee, you have certain responsibilities for the land, property or asset you're leasing. For example, if you're leasing a car from an auto dealer, then it's your responsibility to keep up with the maintenance and cleaning of the car.
Lessees renting a property or apartment are responsible for keeping the apartment within the bounds of your and the lessor's contractual agreement. This can include not changing the structure or look of the apartment with renovations or paint. It also means that as the tenant, you should pay rent on time. Keeping up with your personal finances is important when you're renting and it helps to keep a balance sheet to track your monthly budget so you don't get behind.
As with most apartments, the tenant must fix any damages to the apartment before their lease term expires. Otherwise, you may lose money on your security deposit. Also, give your landlord reasonable notice if you're not going to sign your lease again or if you need to break your lease before the lease period ends.
Because the lessor party keeps ownership of the property or of the asset they're leasing, in most cases, it's their responsibility to maintain the property or asset and repair it as needed. If the lessor leases an apartment, they might also retrieve information such as a background check or credit run before they lease their property. The lessor should also keep track of the legal document and periodic payments they receive from the lessees.
The lessor should keep track of the accounting for the lease and one of the best ways to do so is with lessee accounting software such as LeaseCrunch. There, you'll have default settings and contents that will help you with all your accounting needs.
There are a couple of types of lease agreements that are important to know about whether you are the lessee or the lessor.
An operating lease is a legally binding lease that allows the lessor to keep most of the responsibilities of the leased asset. The lessor, in this case, is in charge of maintaining the day-to-day responsibilities of the particular entity.
The lessees use the leased property for a set amount of time and must pay the lessor.
Capital lease agreements, also known as finance leases, are where the lessee gets full ownership and control of the asset. By doing so, they also take the responsibility of keeping the asset maintained.
It's also good to note that the accounting standards call for the company's balance sheet to record the finance lease as an asset on the company's balance sheet. This lease is typically a long-term lease that spans the lifetime of the asset.
In a sale and leaseback agreement, one party buys a piece of real estate or asset from another party and then, in turn, leases it back to the original seller. Meaning the person who was once the lessor and original owner is now the lessee.
When talking about lessees and lessors, there's a lot to know. However, there are a few key points that you can take away from this knowledge.
Now that you know a little more about lessees and lessors, take that knowledge and find yourself the best apartment for you!
Ashley Singleton is a writer who loves following and writing about current lifestyle, DIY and home improvement trends. You can read some of her other work on the Lady Spike Media website. In her spare time, she performs stand-up comedy in Los Angeles.