The Meaning and Significance of the Word Lessee: How to Under Lease Agreements

Lessee is term that is familiar to anyone leasing an apartment, house or rental property for business purposes. The word lessee appears in other documents like agreements for bank loans, or leases for other rentals. A person who borrows capital, or a potential renter may not necessarily comprehend its significance.

Understanding the word lessee, in conjunction with the word lessor in capital leases, is an important aspect of a transaction because the lessee becomes a debtor to the lessor by signing a legal document. With respect to real estate rental agreements, the word lessee also refers to a tenant, a person who uses or rents a leased asset or property. The word lessee is in car, truck, or machinery or equipment rental agreements. There are also long or short-term leases for the use of furniture, safety deposit boxes, etc. 

What is a lease agreement and can one obtain a form for a lease?

“A lease agreement is a form when two parties, the leaser and lessee, enter into a lease or rental contract”. 

The website, reference.com also offers free, printable forms for leases.

Entanglement in lessor-lessee lease disagreements or disputes can occur in business or with respect to any kind of rental agreement, when there are misunderstandings that have to be resolved. For example, the lessee signs an agreement or a lease with a lessor, but does not comprehend the specified interest rate terms, or the kind of interest he or she must pay. At times, legal intervention (or legal aid) may be necessary. Attempting to break a lease may prove to be almost impossible, particularly when it stipulates that there are extra penalties for late payments, or breaking the lease.    

On the other hand, as potential customers (renters), business owners (lessors) may be dependent upon lessees, for example, a furniture rental store. If lessees did not rent from lessors who own apartment buildings, there could be serious housing shortages. Lessee rights stipulated in a lease, offer some degree of protection to renters.

When drawn up properly, lease agreements should be fair to both the lessee and the lessor, but unfortunately, that is not always the case. Sometimes, a lessee feels taken advantage of by the lessor in a rental agreement, or vice versa. For example, if a lessee rents a vehicle, there may be stipulations in the rental agreement that lead to unexpected expenses like limitations on mileage. A lessor may be seriously disappointed in a lessee if his or her credibility is at stake. A lessee may sign a lease in a hurry or as an act in financial desperation, not realizing the significance of the rental agreement. Vehicle leases may appear affordable and are easily obtained, but at the end of the lease, or if payments have not been made according to the lease agreement, whatever has been leased goes back to the lessor. This may also include payment for damages incurred. At times, there may be a buy-out where the lessee is able to purchase what he or she has leased from the lessor.

With any kind of a lease, the terms are stated in the lease, but the legal jargon may be difficult to comprehend. Almost anything leased can be lost if rental stipulations are not met. Unless there is a compassionate lessor, incurred penalties can mean additional cost to the lessee. In court settlements for leases, the lessor often wins; the lessee loses, but still remains obligated to fulfill the terms of the lease agreement, as he or she has originally signed it.

Lease agreements are subject to interpretation in different ways, so it is important for a lessee to understand exactly what a lease states, before he or she signs it. The significance of the word lessee should never be underestimated.