Lessor vs Lessee: Roles, Rights, and Lease Basics

Introduction

In US leasing, the lessor is the party granting the lease (often the property owner or property manager), and the lessee is the party taking possession and paying rent (the tenant). Their agreement is the lease, which sets terms for rent, use, repairs, entry, insurance, and what happens if something goes wrong. You’ll also hear the everyday terms “landlord” (lessor) and “tenant” (lessee). While the same words appear in equipment leases, this guide focuses on real estate—both residential and commercial.

Knowing how these roles work—and where their responsibilities differ—helps prevent disputes and keeps properties operating smoothly.

What You'll Learn

• Plain-English definitions of lessor and lessee
• What a lease agreement typically covers and why each clause matters
• Differences between residential and commercial leases
• Core duties: rent, deposits, repairs, access, use, and transfer rights
• How courts often handle habitability, early move-outs, and damages
• Practical steps landlords and tenants can take to avoid problems
• Quick reference terms you’ll see in US lease documents

Core Concepts

Lessor vs Lessee: Who’s Who

• Lessor (landlord)

  • Grants the lease and delivers legal right to possess the premises during the term
  • Sets rental price and billing schedule
  • Handles repairs as agreed in the lease and as required by law (for residential, the implied warranty of habitability applies in most states)
  • May enter the premises for repairs or inspections with proper notice, except in emergencies
  • Can enforce lease terms, pursue late fees, and seek eviction when the lease or law allows

• Lessee (tenant)

  • Pays rent on time and follows the lease
  • Uses the space only for the permitted purpose (residential living or a defined business use)
  • Keeps the space reasonably clean, avoids damage beyond normal wear and tear, and reports needed repairs
  • Allows access for lawful entry with required notice
  • May not assign or sublet unless the lease allows it or the landlord consents

Note: State and local law affect many of these duties. Always check what applies where the property is located.

The Lease Agreement: What It Covers

Most real estate leases include:

• Parties and premises

  • Who is bound (including any personal guarantor for commercial tenancies)
  • Exact unit or space, parking, storage, and common areas

• Term and renewal

  • Start and end dates
  • Renewal options, rent steps, and notice windows

• Rent and fees

  • Base rent, payment due date, grace period, late fees, and returned check fees
  • Rent escalations (fixed increases or indexed)
  • For commercial: operating expenses, CAM (common area maintenance), insurance, and taxes (e.g., triple-net “NNN” structure)

• Deposit

  • Amount, account handling, and return deadlines
  • Itemized deductions for damage or unpaid sums
  • State caps and timelines may apply

• Use and rules

  • Residential house rules (pets, smoking, noise, short-term rentals)
  • Commercial permitted use, hours, signage, exclusivity, and compliance with laws

• Repairs and maintenance

  • Who handles what (e.g., landlord structural systems vs tenant interior upkeep)
  • Response times and procedures to report issues
  • For commercial: HVAC responsibility, roof, and system maintenance

• Access and privacy

  • Notice for non-emergency entry (often 24 hours by statute)
  • Emergencies permit immediate entry

• Alterations and improvements

  • Written consent requirements and reversion of improvements at move-out

• Insurance and risk allocation

  • Required policies (e.g., renters insurance for residential, general liability for commercial)
  • Who bears loss for different events

• Transfer and sharing

  • Subletting or assignment rules, consent standards, and recapture rights
  • Co-working or license arrangements in commercial settings

• Default and remedies

  • Cure periods for nonpayment or other breaches
  • Late fees and interest
  • Eviction process and monetary damages

Repairs, Habitability, and Access

• Implied warranty of habitability (residential)

  • Most states require landlords to provide and maintain safe, sanitary housing with working heat, water, and basic utilities and to address serious defects
  • Lease clauses that try to waive this duty are usually unenforceable
  • Tenants may have options such as repair-and-deduct or rent withholding where allowed, but procedures and notice requirements vary by state

• Quiet enjoyment

  • Tenants have the right to occupy the space without undue disturbance from the landlord or others claiming through the landlord
  • Persistent leaks, repeated unannounced entry, or shutting off utilities can breach this right

• Landlord entry

  • Permitted for repairs, inspections, showings, or emergencies
  • Non-emergency entry typically requires prior notice and must occur at reasonable times

Commercial Leases: Extra Terms You’ll See

• Rent structures

  • NNN (tenant pays base rent plus taxes, insurance, and CAM)
  • Modified gross or full-service gross (more costs bundled into rent)
  • Percentage rent for retail based on sales

• Buildout and improvements

  • Landlord work letter vs tenant improvements
  • Allowances, plans, approvals, and delivery conditions

• Compliance and operations

  • Code compliance and ADA considerations
  • Exclusive-use clauses and prohibited uses
  • Estoppel certificates confirming lease facts for lenders or buyers
  • Personal guarantees by business owners

Ending a Lease: Move-Out, Holdover, and Early Exit

• Move-out

  • Walkthroughs and move-out condition
  • Timelines for deposit return and itemized deductions

• Holdover

  • Month-to-month tenancy or increased rent if the tenant stays past the term
  • Potential damages in commercial settings

• Early termination and mitigation

  • If a tenant leaves early, many states require landlords to make reasonable efforts to re-rent to reduce losses
  • Remaining amounts may include rent through re-rental, reletting costs, and other contractually allowed charges

Key Examples or Case Studies

Example 1: Residential Lease

A landlord (lessor) rents a two-bedroom apartment for 12 months. The lease sets a monthly rent, a security deposit equal to one month’s rent, a 24-hour notice rule for entry, pet restrictions, and a repair request process through the online portal. The tenant (lessee) pays rent on time, alerts the landlord to a broken heater, and allows access for repair. The landlord fixes the heater within a reasonable time. At move-out, the landlord returns the deposit within the state’s deadline, minus a small, itemized deduction for carpet cleaning beyond normal wear.

Key point: Clear repair procedures, timely access, and proper deposit handling prevent most disputes.

Example 2: Commercial Lease

A startup signs a five-year office lease in a multi-tenant building. The lease is a modified gross form: base rent includes janitorial service and standard HVAC during business hours, while after-hours HVAC is extra. The tenant must carry general liability insurance and provide a certificate each year. The tenant wants to sublet one wing after downsizing in year three. The lease permits subletting with landlord consent, not to be unreasonably withheld. The tenant secures a subtenant with acceptable credit, and the landlord approves the deal.

Key point: In commercial leases, cost-sharing and transfer rights must be spelled out up front to avoid surprises.

Case Study A: Williams v. Bryant (hypothetical)

Facts: A tenant sues the landlord after a long-standing roof leak damages furniture and creates mold. The tenant had sent multiple written notices and allowed entry for inspection; repairs were delayed for months.

Outcome: The court rules for the tenant, citing the landlord’s duty to maintain habitable premises and the tenant’s right to quiet enjoyment. The tenant receives damages for property loss and partial rent abatement for the period the apartment was materially impaired.

What to learn: Document issues, give written notice, allow access, and keep records of costs.

Case Study B: Smith v. Jones Realty Inc. (hypothetical)

Facts: A commercial tenant vacates eight months early after a downturn. The landlord sues for the full remaining rent. The tenant argues the landlord did not try to re-lease the space.

Outcome: The court awards the landlord unpaid rent and fees, but subtracts amounts the landlord could have avoided by making reasonable efforts to re-rent. Evidence showed limited marketing and no broker engagement for several months.

What to learn: Tenants remain liable for breaches, but landlords usually must mitigate by actively seeking a replacement tenant.

Practical Applications

For lessors (landlords)

• Use a written lease that matches your property type and state law
• Set a clear rent schedule, late fee policy, and reporting process for repairs
• Follow notice rules for entry and keep communication documented
• Handle deposits by the book: caps, escrow rules, and itemized deductions
• For residential, respond quickly to health and safety issues to meet habitability standards
• For commercial, define operating expenses, maintenance duties, and access to building systems
• Screen applicants consistently and comply with the Fair Housing Act and state laws
• When a tenant defaults or leaves early, act promptly to mitigate losses and keep proof of your efforts

For lessees (tenants)

• Read every page of the lease, including addenda and rules; ask questions before you sign
• Confirm rent, increases, deposit rules, and move-out procedures
• Document the unit or space with photos at move-in and move-out
• Report repairs in writing and allow reasonable access
• Keep copies of payments, notices, and communications
• Know your state’s deposit deadlines and habitability rights
• Get renters insurance (residential) or general liability insurance (commercial) as required
• Do not assign or sublet without written consent if the lease requires it; get all approvals in writing
• If you need to exit early, discuss options such as subletting or a lease termination agreement

Related contract terms to review

• Specific Performance
• Mailbox Rule
• Material Term
• Severable Contract
• Benefit of the Bargain Damages

Summary Checklist

• Lessor grants the lease and must deliver possession and meet legal repair duties
• Lessee pays rent, follows the lease, and maintains the space reasonably
• A solid lease covers rent, deposits, repairs, access, use, insurance, and default remedies
• Residential leases include habitability; commercial leases add cost-sharing and business use terms
• Deposits are regulated by state law—follow caps, receipts, and return timelines
• Landlord entry requires proper notice, except for emergencies
• Early move-outs often trigger a landlord duty to mitigate and a tenant duty to cover remaining losses minus amounts reasonably avoided
• Keep everything in writing: notices, repair requests, approvals, and payment records

Quick Reference