A lease is an agreement between two parties, typically the property owner (Lessor) and the user of the property (Lessee). The lease agreement will address the term (period of use) of the lease, price of the lease (rent) and other conditions such as restrictions or conditions of use. Most commercial leases are used to initiate off-balance-sheet financing of assets versus ownership where intense capital investment in real estate can burden the cash flow of an organization. Leases provide the Lessee the use of property without ownership.
This article provides definitions, terminology, and the mathematics to value commercial leases.