What is a Lease?

Published by Thomas Herold in Economics, Investments, Real Estate

'Lease' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Leases are contracts made between an owner, or lessor, and a user, or lesee, covering the utilization of an asset. Leases can pertain to business or real estate. There are a variety of different types of leases that vary with the property in question being leased.

Tangible property and assets are leased under rental agreements. Intangible property leases are much like a license, only they have differing provisions. The utilization of a computer program or a cell phone service’s radio frequency are two example of such an intangible lease.

A gross lease is another type of lease. In a gross lease, a tenant actually gives a certain defined dollar amount in rent. The landlord is then responsible for any and all property expenses that are routinely necessary in owning the asset. This includes everything from washing machines to lawnmowers.

You also encounter leases that are cancelable. Cancelable leases can be ended at the discretion of the end user or lessor. Other leases are non cancelable and may not be ended ahead of schedule. In daily conversation, a lease denotes a lease that can not be broken, while a rental agreement often can be canceled.

A lease contract typically lays out particular provisions concerning both rights and obligations of the lessor and the lessee. Otherwise, a local law code’s provisions will apply. When the holder of the lease, also known as the tenant, pays the arranged fee to the owner of the property, the tenant gains exclusive use and possession of the property that is leased to the point that the owner and any other individuals may not utilize it without the tenant’s specific invitation. By far the most typical type of hard property lease proves to be the residential types of rental agreements made between landlords and their tenants. This type of relationship that the two parties establish is also known as a tenancy. The tenant’s right to possess the property is many times referred to as the leasehold interest. These leases may exist for pre arranged amounts of time, known as a lease term. In many cases though, they can be terminated in advance, although this does depend on the particular lease’s terms and conditions.

Licenses are similar to leases, but not the same thing. The main difference between the two lies in the nature of the ongoing payments and termination. When keeping the property is only accomplished by making regular payments, and can not be terminated unless the money is not paid or some form of misconduct is discovered, then the agreement is a lease. One time uses of or entrances to property are licenses. The defining difference between the two proves to be that leases require routine payments in their term and come with a particular date of ending.

Free Download (No Signup Required) - The 100 Most Important Financial Terms You Should Know!
This practical financial dictionary helps you understand and comprehend the 100 most important financial terms.

The term 'Lease' is included in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.