Thank goodness, we’re done with that lease negotiation stuff! The equipment is in and working great. “Stick those legal mumbo jumbo contract in a file drawer. Let’s get back to business and make some money.” That is often the command issued from the bridge by the Captain of the USS Hard Working Company.
There’s a sense of relief when an equipment purchase is complete. Business owners think nothing more needs to be done except make the lease payments. Believe that, and companies find ugly surprises. Leases require customer vigilance.
Five Lease Notification Requirements
1. Insurance Proof: If the Lessee does not send the Lessor an insurance binder proving that the leased equipment is covered by General Liability and Physical Damage insurance, the leasing company will secure the insurance for the Lessee, at a high price plus a fee.
2. Tax Exempt: Printing equipment lease payments are frequently sales and use tax exempt. State’s offer this exemption to encourage businesses to expand, add equipment and increase their employee headcount. Customers must send the leasing company proof that the equipment qualifies for the tax exemption or the leasing company collects and remits the taxes to the state. Some leasing companies add a processing fee.
3. Relocate Equipment: Request and receive written permission to move equipment across the room or to another town. Remember, the leasing company owns the equipment.
4. Corporate Ownership Changes: Notify the Lessor at least 30-days prior to any change in the company name, headquarters location or company ownership. If this is not done, the customer is in lease default. The default paragraph is the longest and most onerous paragraph in a lease. No company wants to pay the costs of a lease default.
5. End of Lease Notification: Notify the leasing company of your business plans for the equipment. Do not wait until the lease ends to give notice. This is one of the most costly requirements, If not heeded, the lease Automatically Renews.
WARNING: Lease end options usually include the ability to purchase, return or renew the equipment lease. A Florida printer I know is trapped paying twelve extra payments ($12,000) because they didn’t send the leasing company written notice of their intent to purchase the equipment for $1.00. The lease required them to send written notice no less than 90-days and no more than 120-days before the lease ended. Oops. Now that’s a budget blower.
SUMMARY: On the first day of a new lease, set up a lease management system to track all lease required notifications or be prepared to pay the price.