Broadly put, a lease agreement is a contract between two parties, the lessor and the lessee. The lessor is the legal owner of the asset; the lessee obtains the right to use the asset in return for regular rental payments.
The lessee also agrees to abide by various conditions regarding their use of the property or equipment. For example, a person leasing a car may agree that the car will only be used for personal use.
The narrower term rental agreement can be used to describe a lease in which the asset is a tangible property. Language used is that the user rents the land or goods let or rented out by the owner. The verb to lease is less precise because it can refer to either of these actions. Examples of a lease for intangible property are use of a computer program (similar to a license, but with different provisions), or use of a radio frequency (such as a contract with a cell-phone provider). The term rental agreement is also sometimes used to describe a periodic lease agreement (most often a month-to-month lease) internationally.
A lease is a legal contract, and thus enforceable by all parties under the contract law of the applicable jurisdiction. Some specific kinds of leases may have specific clauses required by statute depending upon the property being leased, and/or the jurisdiction in which the agreement was signed or the residence of the parties.
Common elements of a lease agreement include:
- Names of the parties of the agreement.
- The starting date and duration of the agreement.
- Provides conditions for renewal or non-renewal.
- Has a specific consideration (a lump sum, or periodic payments) for granting the use of this object.
- Has provisions for a security deposit and terms for its return.
- May have a specific list of conditions which are therein described as Default Conditions and specific Remedies.
- May have other specific conditions placed upon the parties such as:
- Need to provide insurance for loss.
- Restrictive use.
- Which party is responsible for maintenance.