Definition: A lessor is the business or individual in a lease agreement that grants another party the right of possession and the right to use the leased property. In other words, a lessor leases or rents leased property to the lessee.
What Does Lessor Mean?
Leasing a piece of property is much like renting it for a set period of time. The lessor is the owner of the property who rents it to the lessee. Leases are very popular for expensive items that businesses can’t afford to buy like buildings and large equipment.
A building is probably the best example. Big Bob’s Clothing wants to start a new store location near the mall, but it can’t afford to build or buy a new building. BBC out that Al’s Rental Company owns a retail building close to the mall and is looking for renters. BBC signs a one-year lease with ARC and moves in the next week.
Big Bob’s Clothing is considered the lessee and Al’s Rental Company is considered the lessor. By signing the lease agreement, ARC gives the rights of possession or in this case occupancy as well as use to BBC. In turn, BBC gives ARC a rent check every month. This is a standard lease agreement no different than if you were renting an apartment.
Other popular leases include car leases, machinery leases, large construction equipment leases, among others. Leases allow the lessee access to property it wouldn’t otherwise be able to afford and allow the lessor the ability to earn rental income.