For your business to be competitive, you need to employ modern technology. Sometimes, buying state of the art equipment may not be a clever idea because of financial constraints. A better alternative can be to lease equipment. This does not only shield you from upfront expenses, it also offers you tax benefits. When you lease equipment for your business, you enter into an equipment lease agreement with the lessor. Read on to learn more about equipment leasing contracts, and where to purchase a equipment lease agreement template online.
What to Look Out for in Equipment Lease Contracts
Equipment
The contract needs to define the equipment that is being leased. Non-specific definitions of equipment are the reason for many rental agreement conflicts. Complicated equipment consist of many parts and attachments, if any of these are removed, you need to note the ones that are missing.
Terms
A few leases are based on monthly contracts and do not go for more than a month. Pay attention to the term of the contract.
Rent
It is important to determine the amount of rent, the duration, and the acceptable installments. You should also know how a lease is terminated and whether there are any auto-renewal terms.
Usage Limitations
Rented equipment is subject to wear and tear. This is why it’s necessary for the lessor and lessee to settle on usage limits.
Insurance
You need to determine what your responsibility is with regards to insurance on the equipment.
Transportation and Installation
The contract needs to state the person responsible for transportation and installation of the equipment.
Maintenance
The contract should outline the equipment’s maintenance procedures. It should also indicate the one responsible for executing these procedures and paying for them.
Warranties
Although the law requires that you get assurances regarding the quality and safety of equipment, additional warranties affecting the performance and state of equipment needs to be considered carefully.
Risk Issues Affecting Equipment Lease Agreements
One of the issues affecting equipment lease contracts is indemnification and risk. In case the equipment is damaged, it is important to know the person who will be held responsible. Another thing to consider is the person who will be required pay for damages when equipment causes an accident or malfunctions. In many cases, the lessors (owner of the equipment) require the lessee (the one renting the equipment) to indemnify them to a certain extent in the event of an accident or malfunction of the equipment. These clauses either limit indemnification to cases involving the negligence of the lessee or provide complete indemnification without regard to the reason for the malfunction. It is important to ensure indemnification clauses are clear and that both the lessor and lessee are held accountable for unexpected expenses, large liabilities, and insufficient insurance.
Termination of the Equipment Lease
Before an equipment rental contract is terminated, the lessee is required to present a termination letter. The termination letter provides the date and conditions under which the lease won’t be renewed. These letters are usually time sensitive and need to be sent in a particular manner. You should be cautious during the drafting and issuance of termination letters to avoid leasing the equipment for a longer period.
Leasing business equipment is an efficient strategy for businesses that are short of financial muscle, and for startups. When leasing equipment, many people rush online to download lease agreement templates. While this is cheaper than hiring a lawyer to draft a contract, it tends to expensive in the long run. It is advisable to involve a lawyer in any contract you engage in to ensure that you clearly understand the implications of the agreement. In any case, if you choose to go it alone, pay attention to the terms of the lease, and watch out for the indemnification clauses.
The smart thing is to hire a lawyer or professional to draft your agreement, but you can also purchase a equipment lease rental agreement template online.
