Top Ten Things to Know About Equipment Lease Contracts
By [http://ezinearticles.com/?expert=George_Parker]George Parker
Equipment leasing helps thousands of U.S. companies to grow and boost their profits each year. Savvy business owners who benefit from leasing are aware of these top ten lease contract points:
? Binding Agreement. Equipment leases are legally binding contracts. Usually the leasing company will have very few obligations to fulfill. In contrast, your company will have several significant obligations, including proper equipment maintenance, insurance, payment of rents, and others. Read the contract carefully and/or go over it with your attorney.
? Interim Rent. This partial rent is due for the period between acceptance of the equipment by your firm and the lease start date. Many leases provide for a daily rent amount that is equal to the monthly amount divided by thirty. Beware that your firm will pay significant interim rent if equipment acceptance takes place early in the month and the lease starts the first day of the following month. To reduce this expense, you should negotiate the interim rent clause or schedule your equipment delivery and acceptance toward the end of the month.
? Triple Net Lease. Most leases are triple-net contracts. This means that the lessee is responsible for all insurance, maintenance, and taxes related to ownership or possession of the equipment. Taxes usually include property taxes and sales/use taxes. Insurance typically includes casualty and liability insurance in favor of the leasing company. Maintenance clauses usually require the lessee to maintain the equipment in good working order or up to a specified standard.
? Personal Guarantees. Some leases require personal guarantees of the lessee’s principals. Under most guarantees, the guarantors stand behind the lessee’s performance and obligations under the lease. In many cases, the guarantee gives the leasing company the right to bypass the courts and demand guarantor performance upon certain uncured contract defaults.
? Assignable Contract. Most leases give the leasing company the right to sell and/or assign the contract to another party at will. This clause is important because the leasing company may be required by its funding source to assign (or sometimes sell) the lease to receive financing. Some leases allow the lessee to assign its rights and responsibilities under the lease. This assignment usually does not relieve the lessee of its obligations, unless the leasing company grants the lessee such a release.
? Hell-or-High-Water lease. The vast majority of equipment leases require the lessee to perform its obligations under the lease without any right to off-set, hold back, counter-claim, or otherwise withhold payments due under the lease. If the lessee has a legitimate claim against the leasing company, it would have to pursue that claim separately in court or arbitration, as provided for in the lease.
? Payment Defaults. Most leases require that the lessee make lease payments on specified dates. While most leasing companies will allow some leeway in paying late and they are reluctant to issue default notices, defaults can trigger severe consequences. A payment default can initiate expensive legal proceedings and ultimately lead to repossession of the equipment. Avoid these hassles by making your company’s lease payments on time.
? Return of Equipment. Leases typically stipulate that the lessee must return the equipment in good condition, if the lessee does not purchase it at lease end. Leasing companies usually allow normal equipment wear and tear. Leasing companies can and often will charge for damaged or missing equipment, and missing parts.
? End-of-Lease options. Many leases allow the lessee to purchase the equipment for a bargain amount at lease end. Some leases do not. Rather, these leases may offer a variety of options, including: the right to purchase the equipment at fair market value; the right to return the equipment; the right to renew the lease for a specified period; the right to continue the lease on a month-to-month basis; the right to purchase the equipment at a stated price; and/or various other options. Make sure you read the lease carefully and that the lease has the desired end-of-lease options.
? Choice of Law. Typically, a leasing company will choose its state and/or county as the legal venue under which lease disputes get resolved. Therefore, a court or arbitrator in one of these jurisdictions will likely settle any contract disputes. If the location is a state other than where your company resides and a dispute arises, your company may have to hire legal counsel licensed to practice in that state.
When a leasing company presents you with a contract to sign, keep these top ten lease considerations in mind. While they highlight only a few lease considerations, they are among the most important.
George Parker is a twenty-five year industry leader, co-founder and Executive Vice President of Leasing Technologies International, Inc. (”LTI”). He is author of several articles and e-books, including “Using Venture Leasing As A Competitive Weapon” and “101 Equipment Leasing Tips”.
LTI provides superior financing solutions to emerging growth companies and venture capital-backed start-ups. Visit http://www.ltileasing.com/ to learn how LTI’s innovative equipment financing can help you get a jump on competitors.
Article Source: http://EzineArticles.com/?expert=George_Parker http://EzineArticles.com/?Top-Ten-Things-to-Know-About-Equipment-Lease-Contracts&id=1005491
Equipment leasing helps thousands of U.S. companies to grow and boost their profits each year. Savvy business owners who benefit from leasing are aware of these top ten lease contract points:
1. Binding Agreement. Equipment leases are legally binding contracts. Usually the leasing company will have very few obligations to fulfill. In contrast, your company will have several significant obligations, including proper equipment maintenance, insurance, payment of rents, and others. Read the contract carefully and/or go over it with your attorney.
2. Interim Rent. This partial rent is due for the period between acceptance of the equipment by your firm and the lease start date. Many leases provide for a daily rent amount that is equal to the monthly amount divided by thirty. Beware that your firm will pay significant interim rent if equipment acceptance takes place early in the month and the lease starts the first day of the following month. To reduce this expense, you should negotiate the interim rent clause or schedule your equipment delivery and acceptance toward the end of the month.
3. Triple Net Lease. Most leases are triple-net contracts. This means that the lessee is responsible for all insurance, maintenance, and taxes related to ownership or possession of the equipment. Taxes usually include property taxes and sales/use taxes. Insurance typically includes casualty and liability insurance in favor of the leasing company. Maintenance clauses usually require the lessee to maintain the equipment in good working order or up to a specified standard.
4. Personal Guarantees. Some leases require personal guarantees of the lessee’s principals. Under most guarantees, the guarantors stand behind the lessee’s performance and obligations under the lease. In many cases, the guarantee gives the leasing company the right to bypass the courts and demand guarantor performance upon certain uncured contract defaults.
5. Assignable Contract. Most leases give the leasing company the right to sell and/or assign the contract to another party at will. This clause is important because the leasing company may be required by its funding source to assign (or sometimes sell) the lease to receive financing. Some leases allow the lessee to assign its rights and responsibilities under the lease. This assignment usually does not relieve the lessee of its obligations, unless the leasing company grants the lessee such a release.
6. Hell-or-High-Water lease. The vast majority of equipment leases require the lessee to perform its obligations under the lease without any right to off-set, hold back, counter-claim, or otherwise withhold payments due under the lease. If the lessee has a legitimate claim against the leasing company, it would have to pursue that claim separately in court or arbitration, as provided for in the lease.
7. Payment Defaults. Most leases require that the lessee make lease payments on specified dates. While most leasing companies will allow some leeway in paying late and they are reluctant to issue default notices, defaults can trigger severe consequences. A payment default can initiate expensive legal proceedings and ultimately lead to repossession of the equipment. Avoid these hassles by making your company’s lease payments on time.
8. Return of Equipment. Leases typically stipulate that the lessee must return the equipment in good condition, if the lessee does not purchase it at lease end. Leasing companies usually allow normal equipment wear and tear. Leasing companies can and often will charge for damaged or missing equipment, and missing parts.
9. End-of-Lease options. Many leases allow the lessee to purchase the equipment for a bargain amount at lease end. Some leases do not. Rather, these leases may offer a variety of options, including: the right to purchase the equipment at fair market value; the right to return the equipment; the right to renew the lease for a specified period; the right to continue the lease on a month-to-month basis; the right to purchase the equipment at a stated price; and/or various other options. Make sure you read the lease carefully and that the lease has the desired end-of-lease options.
10. Choice of Law. Typically, a leasing company will choose its state and/or county as the legal venue under which lease disputes get resolved. Therefore, a court or arbitrator in one of these jurisdictions will likely settle any contract disputes. If the location is a state other than where your company resides and a dispute arises, your company may have to hire legal counsel licensed to practice in that state.
When a leasing company presents you with a contract to sign, keep these top ten lease considerations in mind. While they highlight only a few lease considerations, they are among the most important.
George Parker is a twenty-five year industry leader. He is author of several articles and e-books, including “Using Venture Leasing As A Competitive Weapon” and “101 Equipment Leasing Tips”.
Natloans provides superior financing solutions to emerging growth companies and venture capital-backed start-ups. Visit
natloans.com.au to learn how natloans innovative equipment financing can help you get a jump on competitors.
By [http://ezinearticles.com/?expert=George_Parker]George Parker
Article Source: http://EzineArticles.com/?expert=George_Parker http://EzineArticles.com/?Top-Ten-Things-to-Know-About-Equipment-Lease-Contracts&id=1005491
Equipment Finance, Tips | truckFinance | August 10, 2009 | 
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