Difference Between Lease & Sublease

Lease

Lease is the legal agreement between the property owner and tenant to rent the property over a period of time. The tenant or lessee is the person who rents the property from the owner, she has obligation to make regular payment in order to use the lessor property. Lessor is the property owner who agrees to let the tenant use their property in exchange for a rental fee.

Lease agreement may contain other terms such as duration, monthly rental fee, insurance requirement, lessor, and lessee’s responsibility for the lease term.

Example

Mr. A owns a house and he decides to rent it to Company ABC with a rental fee of $ 5,000 per month.

This is the lease contract in which Mr. A is the lessee and company ABC is the lessor. Both parties agree to rent the property which is the house. Mr. A still has ownership over the house, but he agrees to let lessee use the it during the contract period.

Sublease

Sublease is the legal agreement that rents the property between the tenant and a third party. It means the tenant has a lease with the property owner and then she re-rent the part or whole of the property to the third party.

The lessor is not the property owner, but she just rent the property from the owner and re-rent to the other parties.

Example

Continue from the above example, Company ABC has made another agreement to rent the same house to a new tenant for $ 5,500 per month.

It is the sublease, as the lessor (Company ABC) does not own the house, they just have the right to use the house. And they decide to sell the right to a new tenant over a period of time.

Difference Between Lease and Sublease

	Lease	Sublease
Definition	Rental contract between owner and tenant.	Rental contract between tenant and lessor who is not the owner as well.
Contract Term	Usually a long-term contract.	Usually a short-term contract.
Ownership	Lessor is the owner of the property.	Lessor is not the owner of the property.
Expense	The main cost for lessor is the deprecation expense of the property.	The main cost for lessor is the rental fee paid to the owner.