What Is a Lease?

What Is a Lease?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

A lease is a legal contract or agreement that allows one party, referred to as the lessee, to use and occupy a piece of property owned by another party, referred to as the lessor, for a specified period of time in return for periodic payments. The conditions and terms of the lease, including the duration and the amount of payment, are established by both parties and are laid out in the lease agreement.

Related Questions

1. What are the most common types of leases?

The most common types of leases include residential leases, commercial leases, and vehicle leases. In a residential lease, the lessee rents the property for living purposes. A commercial lease involves property being rented out for business activities. Vehicle leasing involves the rental of cars for a specified period.

2. What happens at the end of a lease term?

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At the end of a lease term, the agreement may either end, renew for another term, or continue on a month-by-month basis depending on the terms outlined in the lease agreement. The lessee may also have an option to purchase the property, particularly in the case of car leases.

3. What does a lease agreement typically include?

A lease agreement typically includes details such as the names of the lessor and lessee, the duration of the lease, the amount and schedule of payments, the terms and conditions for ending the lease, and the responsibilities of both parties in regards to maintenance, repairs, and other matters.

4. What happens if a lease is broken?

If a lease is broken, the party that breaks the lease may face penalties. For instance, if a lessee breaks a lease, they may lose their security deposit and could potentially face legal action from the lessor for the unpaid rent. Each lease agreement should detail the consequences of breaking the lease.

5. Can lease terms be negotiated?

Yes, lease terms can often be negotiated before the contract is signed. Both the lessor and the lessee have the right to negotiate terms such as rental price, lease duration, rules about pets or decoration, and maintenance responsibilities.