This equipment lease is between
The Owner is the owner of the equipment described in Exhibit A (the "Equipment").
The Renter wishes to lease the Equipment from the Owner.
The parties agree as follows:
1. LEASE OF EQUIPMENT.
Effective as of the effective date set forth in section
2. DELIVERY OF EQUIPMENT; SITE.
3. RENT; SECURITY DEPOSIT.
4. OWNERSHIP.
Except for the Renter's rights of use under this Lease, the Equipment is and will remain the exclusive personal property of the Owner, even if installed in or attached to real property by the Renter. Payment of the Rent does not give the Renter any equity interest in the Equipment. The Renter has no interest in the Equipment except as expressly set forth in this Lease.
5. CARE, USE, AND MAINTENANCE OF EQUIPMENT.
6. EQUIPMENT WARRANTIES.
7. OWNER'S PERFORMANCE OF RENTER'S OBLIGATIONS.
If the Renter fails to pay taxes on, maintain insurance on, or repair the Equipment, or to pay fees, charges, or assessments, or to discharge any other obligations under this Lease, the Owner may make payments or perform acts that the Owner deems necessary. This includes payment of amounts necessary to retain insurance, to repair or maintain the Equipment, or to satisfy fees, charges, or assessments. The Renter shall reimburse the Owner on the next due date for Rent for all amounts paid or incurred by the Owner. The Renter shall pay interest on amounts to the Owner under section 3(c), which shall begin accruing on the date of the Owner's payment, and pay any reasonable attorneys' fees incurred by the Owner in connection with its actions performed under this section.
8. INSURANCE.
9. TAXES AND FEES.
During the Term, the Owner shall pay all applicable taxes, assessments, and license and registration fees on the Equipment. The Owner shall, on request, provide the Owner with proof of those payments and copies of any tax returns and reports filed or prepared concerning the Equipment.
10. LIABILITY FOR LOSS AND DAMAGE.
11. TERM; TERMINATION.
12. DEFAULT; RIGHTS ON DEFAULT.
15. INDEMNIFICATION.
16. GOVERNING LAW.
17. AMENDMENTS.
No amendment to this agreement will be effective unless it is in writing and signed by a party or its authorized representative.
18. ASSIGNMENT AND DELEGATION.
19. COUNTERPARTS; ELECTRONIC SIGNATURES.
20. SEVERABILITY.
If any one or more of the provisions contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this agreement to be unreasonable.
21. NOTICES.
22. WAIVER.
No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.
23. ENTIRE AGREEMENT.
This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.
24. HEADINGS.
The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement's construction or interpretation.
25. EFFECTIVENESS.
This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this agreement.
26. NECESSARY ACTS; FURTHER ASSURANCES.
Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement, including signing any documents for purposes of recording or filing to protect the interest of the Owner in the Equipment.
[SIGNATURE PAGE FOLLOWS]
Each party is signing this agreement on the date stated opposite that party's signature.
Date:______________________________ | By:____________________________________________________________ |
Name: |
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Date:______________________________ | By:____________________________________________________________ |
Name: |
[PAGE BREAK HERE]
EXHIBIT A
INVENTORY OF EQUIPMENT LEASED
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Model Serial No. | Manufacturer | Description | Quantity (No.) |
How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.
Your operation needs the latest technology to compete effectively in today’s business world. Buying equipment can use up available funds and may saddle your company with outdated property. Equipment leasing may be an excellent way to update your business without incurring significant upfront costs.
With an equipment lease or equipment rental agreement, almost any kind of property can be leased, from computers and heavy machinery to phone lines and cars. When equipment is leased, the renter can have it and use it for a certain time period. The renter just needs to pay the property owner a rental fee.
For a business, leasing equipment may be better than buying for many reasons. A lease can provide lower monthly payments, a fixed financing rate, certain tax advantages, conservation of working capital, and immediate access to up-to-date business tools.
On the other hand, long-term leasing may be more expensive than buying the equipment outright. There are many factors that contribute to a decision about whether leasing or buying is right for a given company, including the nature of its industry and the types of equipment it’s interested in.
This article covers everything you need to customize and complete your equipment lease agreement.
An equipment lease is an agreement in which one party (the “lessor”) gives the other party (the “lessee”) the right to have and use (but not own) the lessor’s equipment for a certain period of time.
In exchange, the lessee will make payments to the lessor and be responsible for maintaining and paying taxes on the equipment during the lease period. At the end of that period, depending on the lease, the lessee may be allowed to buy the equipment it has been leasing. In other cases, the lessee may be allowed to renew the lease for another term.
There are many types of equipment that can be leased, from furniture to phones and forklifts to copiers. Generally, items that are valued under a certain amount (usually around $5,000) are purchased, not leased.
There are usually three ways a company can get the business equipment it needs:
For new companies, using available capital to make cash payments may not be possible (or wise). Borrowing money may stretch a company’s credit line and be more costly in the long run after calculating interest payments.
Leasing equipment will let an organization:
In addition, if the equipment needs to be upgraded or changed consistently (e.g., computers), a lease won’t leave the company owning the old property—the lessee can sign a lease for the newer property when the need arises.
Before sitting down to sign the lease, decide what your goals are. A good agreement is one that captures the intentions of the parties accurately. Clarify your agreement's terms and conditions before writing them down.
Allow each party to spend time reviewing the lease. Each party must get ample time to understand the terms or how those might affect the lease as a whole.
Both parties should ensure that the agreed terms and conditions are clearly mentioned. It’s always better to be over-explanatory to avoid any doubts and misunderstandings.
If both parties expect to have an ongoing relationship, use the equipment rental agreement to create a “master lease.”
This will allow you to keep the same document for a long time, adding or taking out equipment or changing certain terms (e.g., the lease rate, the expiration date, etc.) by writing new exhibits. You won’t have to change or renegotiate other terms of the agreement: most of the text will remain the same.
As a lessor, you may have concerns about providing a “warranty of merchantability” for the leased equipment.
A warranty of merchantability is a promise that the property will meet an ordinary buyer’s expectations (in other words, the equipment is what the lessor says it is). If you make the lease a “finance lease,” you may be able to avoid this promise. If this is the case, once the lessee accepts the equipment, it can't later bring a lawsuit against the lessor, claiming that the goods are defective.
If the lessee uses the equipment illegally, the government could confiscate it. Consider including a provision requiring that any use of the equipment be in compliance with all laws.
In some states, the lessor can file a “fixture filing” to protect its interest in equipment that is (or will become) a fixture (in other words, permanently attached to the land or other real property).
In other states, however, the lessor should get documentation from the landlord showing that the lessor’s interest in the equipment has top priority if the lessee defaults or at the end of the lease term.
Unless its equipment is or will become a fixture, the lessor is usually not required to file any lease documents with the state to protect its interests. However, it may be a good idea to make such filings to prevent the deal from being seen as a secured transaction.
The lease should disclaim all equipment warranties. Implied warranties can be avoided using expressions like “as is,” “with all faults,” or any similar language.
All disclaimers must be clear and prominent (capitalized, in bold type, or highlighted). To disclaim or change a warranty of merchantability, use language that refers specifically to merchantability.
In Illinois, courts don’t like disclaimers of implied warranties. These clauses are read in a way that doesn’t favor sellers. In other words, if there is any way to read the provision to benefit the buyer, that’s how it’ll be read.
If you want to disclaim an implied warranty in Illinois, you should make this clear and prominent in your agreement.
The equipment lease agreement prevents the lessee from changing or adding to the equipment without the lessor’s consent. Additions to equipment are considered income for the lessor, which can have immediate and significant tax implications. Talk to a tax professional if you have questions about how this regulation may affect you.
Sign two copies of the lease agreement. One copy is kept with the lessor, and the other is given to the lessee.
It’s a good idea to get the agreement witnessed or notarized. This will limit later challenges to the validity of a party’s signature.
If your agreement is complicated, contact an attorney to help you draft a document that meets your specific needs.
The following instructions will help you understand the terms of your lease agreement:
This section identifies the parties involved in the agreement and, if applicable, what type of entities they are.
In an equipment rental agreement, the party leasing the equipment is called the lessor, and the party renting it out is the lessee. You also need to write the date on which the document is effective (usually when it is signed).
The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key background information about the parties (i.e., the lessor and lessee).
In this agreement, this section includes a simple statement of the intent to lease the equipment. In other words, the lessor agrees to lease the equipment on certain conditions.
In this part, provide the full description of the equipment. For instance, you can include details like:
You must be comprehensive and clear when describing the equipment being leased.
This section acknowledges and accepts the lease of the equipment. It includes all the equipment, including any additional items that the receiving party leases from the lessor. The terms of the lease are applicable for all the equipment and tools taken on the lease.
The time period during which the equipment is leased is called the “term.” Mention the agreed-on rental period here.
This period will start on the later of the following dates: the effective date or the date on which the lessee receives the equipment. If the equipment is received after the effective date, you must also clarify that.
At the end of the term, the lessee can renew the lease or return the equipment to the owner.
Additionally, the agreement gives the lessee the opportunity to buy the equipment at the end of the term. If you include such provisions, you must mention the conditions for purchasing the equipment.
In most agreements, each party is expected to do something. This obligation may be to perform a service, transfer property ownership, or pay money. In this case, the lessee gives the lessor money each month to pay for the right to use the equipment.
You’ve to write the amount that the lessee will pay as rent. The lessee also makes an advance payment (generally a month’s rent) to the lessor.
In this provision, the lessee agrees to pay a deposit to the lessor at the beginning of the lease to guarantee the condition of the equipment. Enter the amount to be paid. This money will be returned to the lessee at the end of the term if the equipment is still in good condition.
States that the equipment is still the lessor’s personal property, even though the lessee has the right to use it for their business. There is no transfer of title to the equipment, even if it’s attached to or installed on the lessee’s property.
The lessee must:
The lessor’s promise about the property that is being leased. More specifically, the lessor is swearing that:
The Lessee’s promise about the property that is being leased. More specifically, the lessee is swearing that:
This section states that the lessor can pay or do anything it thinks is required if the lessee doesn’t keep insurance coverage, pay taxes or fees, or repair the equipment. If the lessor does this, the lessee must reimburse the lessor for its expenses and pay interest and legal fees for any amounts paid.
During the term, the lessee must get insurance on the equipment and give a copy of any proof of that insurance to the lessor. The insurance should cover any loss or damage to the equipment and also any risk of harm to the general public by the equipment.
Even if the parties already have similar insurance, the policy required in this section will be the primary one. The lessee is allowed to change its coverage only after giving the lessor an advance notice.
This clause requires the lessee to pay all applicable taxes and fees during the term, and they should provide any relevant paperwork about these payments to the lessor.
This section states that the lessee has to pay for any loss or damage to the equipment. If the equipment is totally damaged or stolen, the lessee needs to pay for its repair or need to replace the equipment with a new one.
The lessee also needs to pay any outstanding fees, part of the cost of the item, and the total amount the lessor would have received as rent on that equipment during the term.
Lists the events that are considered “Events of Default” by the lessee. In other words, if the lessee does any of the things that are mentioned in the list, the lessor can walk away from the lease and demand payment or action as required under the lease. The next section explains what the lessor can do if the lessee defaults.
This section mentions the rights of the lessor when the lessee defaults. The lessor has the full right to end the lease and take back the equipment if they see any breach in the agreement. For instance, if the lessee doesn’t deliver the equipment at the end of the lease term, the lessor can go to the lessee’s property and retake it without having to get a court order or police assistance.
This section is to write down all the interest-related clauses.
For example, if the lessee is late on any of its payments, it'll have to pay interest on the unpaid amounts until the payment is made. You need to provide the interest rate you want to levy from the lessee. The interest will start adding up on the date the payment is due.
Before you choose this rate, make sure you know what the legal limits are for interest rates in your state. If you select a rate that is too high, you may not get any interest at all.
This is an optional section explaining that the lessee will pay the lessor back for any costs the lessor incurs relating to the lessee’s use of the equipment.
At the end of the term, the lessee must return the equipment at its own expense unless it renews the lease or buys the equipment.
In this section, the lessor is given the right to examine the equipment during normal business hours.
States that the parties’ rights and obligations will be passed on to successor organizations (if any) or other organizations to which rights and obligations may be permissibly assigned.
Explains that even if one party allows the other to ignore or break an obligation under the lease, it doesn't mean that the party waives any future rights to require the other to fulfill those (or any other) obligations.
This provision gives the lessee the option to renew the lease at the end of the term. The terms pertaining to renewal will be decided after discussion with the involved parties.
This section gives the lessee the option to buy the equipment.
This provision indicates that the lessee will fill out any additional documents that the lessor thinks are necessary to show that the lessor is still the owner of the equipment.
Lists the addresses to which all official or legal correspondence should be delivered. Provide a registered mail address for both the lessor and the lessee.
Allows the parties to choose the state laws that'll be used to interpret the document.
This provision states that even if the parties sign the agreement in different locations or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same agreement. In a modern world where signing parties are often not in the same city—much less the same room—this provision ensures that business can be transacted efficiently without sacrificing the validity of the agreement as a whole.
Protects the terms of the lease as a whole, even if one part is later invalidated. For example, if a state law is passed prohibiting interest on unpaid rent, it won't undo the entire lease. Instead, only the section dealing with interest on unpaid rent would be invalidated, leaving the remainder of the lease enforceable.
In this part, the parties agree to sign the equipment lease for the terms and conditions mentioned in the agreement. Unfortunately, including this provision won't prevent a party from arguing that other enforceable promises exist, but it'll provide you some protection from these claims.
It states that the headings at the beginning of each section are meant to organize the document and shouldn't be considered essential parts of the agreement. In other words, anyone looking at the lease should pay attention to the content of the clauses, not to the titles.
An equipment lease agreement or equipment rental agreement is really a long and exhaustive document with many legal clauses involved. Writing a rental agreement on your own can be a daunting task. Moreover, you should be careful not to make any errors that can lead to misrepresentation.
An equipment lease agreement template can be your key reference point for writing these agreements. LegalZoom offers professional and comprehensive lease agreement templates at a convenient price. The templates are customizable to suit your needs. Additionally, LegalZoom offers a wide array of business agreement templates that could be used for your varied personal and professional needs.
If your current equipment is damaged or needs repairing before you can use it, then you can upgrade your equipment with a new one—but maybe not buy it when you have the option to lease it.
An equipment lease agreement ensures the equipment owner and the renter know what's expected of them—and the equipment itself—during the duration of the lease and beyond.
Leasing equipment can help keep businesses stay competitive without the upfront costs and commitments of purchasing.
To complete an equipment rental agreement, you’ll need the following details: