Lease

A lease is a formal contractual arrangement between two parties. One party is the lessor, who is the legal owner of an asset. The other party is the lessee, also known as the tenant. The lessee gains the right to use the asset in exchange for regular payments. This legal agreement is enforceable under the contract laws of a specific jurisdiction. In the United States, a lease for real estate is a hybrid contract. It combines elements of a standard contract with qualities of a deed.

Leases can involve many different types of assets. Tangible property includes things you can touch, like land, buildings, or vehicles. You can lease personal property such as cars, furniture, or even jewelry. Real property includes raw land, apartments, and business spaces. There are also leases for intangible property. These involve things you cannot touch, like a computer program or a radio frequency. A lease for a radio frequency might be a contract with a cell-phone provider.

Every lease agreement contains specific essential elements. It must name the parties involved in the agreement. It must also state the starting date and the duration of the term. The contract must identify the specific object being leased. This is done using a street address, a Vehicle Identification Number (VIN), or a serial number. The agreement defines the consideration, which is the payment made for use. This can be a lump sum or periodic payments. Most leases also include terms for a security deposit and its eventual return.

Lease agreements often include complex rules and conditions. A lease may list default conditions and specific remedies if rules are broken. It might require the lessee to provide insurance for the asset. The contract may also state which party is responsible for maintenance. Some leases include a termination clause. This explains what happens if the contract is ended early by either party. A lessee might also have the right to sub-lease the property. If permitted, the original lease is called a headlease, and the person renting it out is a mesne landlord.

There are several distinct types of tenancies. A fixed-term tenancy, or tenancy for years, has a definite beginning and end date. Even a lease lasting only one week can be called a tenancy for years. Some leases are cancelable, meaning they can be terminated by one or both parties without penalty. A non-cancelable lease cannot be terminated early in this way. In the United Kingdom, certain leases require official registration. A lease for land lasting more than seven years must be registered at the land registry. A lease for more than three years must be granted using a deed.

It is important to distinguish a lease from a license. A license allows a person, called a licensee, to use property. However, a license is subject to termination at the will of the owner, called the licensor. For example, a ticket to a baseball game is a license. A parking lot owner giving permission to park is also a licensor. A lease is different because it provides the lessee with exclusive possession. This means the tenant can exclude the lessor and others from the property. A lease usually involves regular periodic payments and a specific end date.

History shows how the use of leases has evolved over time. For many centuries, leases were primarily used for agricultural purposes. This changed during the late 18th and early 19th centuries. As industrialization caused cities to grow, leases became vital for urban landholding. In the past, common law assumed both parties had equal bargaining power. This is known as the laissez-faire philosophy. However, the growth of consumerism led to new consumer protection legislation. Today, many jurisdictions have specific laws to protect residential tenants. These laws ensure that the relationship between landlords and tenants is more equitable.