What should you know when drawing up a lease agreement?

When you are starting a new business, whether it be an official business, restaurant or any other that requires specific equipment, it is costly to have to purchase everything you need at once. Also, depending on the life span of the equipment you need and how quickly it becomes obsolete, it may not be profitable to have to buy everything you need. Instead, you can get a lease agreement to lease different equipment enabling you to sign a contract for a set term that the equipment will be yours to use and giving you the option to trade it in for newer models once the time is complete.

This system was regularly used for the acquisition of property some time ago but was either forgotten or ignored during the real estate boom. However, due to the recent slump in the housing market, this option has been revitalized and is fast becoming more popular in real estate circles.

This agreement has to be in written form, and the document has to be agreed upon by both parties. Like all legal documents, there is a protocol involved. Therefore, a contract has to be drawn up and signed by both the property owner and the person (from here on refers to as the lessee) who wishes to use the property. This contract is what now becomes the Lease Purchase Agreement. The services of a lawyer are usually retained by both the property owner and the lessee to word the document and oversee and explain the legal angles.

While it’s hard to draw up a contract without biases between two opposite parties (property owner and lessee), there are certain criteria that a good Lease Purchase Agreement should have. The location, size, and boundaries of the property should be explicitly stated. The size of the property and its location affects the cost. The limits are necessary for that property do not have definitive shapes and therefore may not be suitable for the lessee intended use. Of utmost importance, make sure the property is free of financial liabilities (that there is no lien on the property). No agreement should be entered into without first agreeing on the final sum of money to be paid and the time frame in which it is to be paid.

It is also important to take into consideration that circumstances can and may change before the final date, and how much one stands to gain or lose if the deal falls through. Both parties should have an agreeable exit clause drafted in the final document. Finally, make sure that the paper is dated and witnessed by an independent third party or a third party on each side.

All the details above should be taken into consideration if you plan to enter into any such agreement because you have to protect yourself and the other party also have to protect them selves. There are templates for these types of deals found online and more details that will give an insight as to the legalities and how to go about getting everything done. It will then be up to you to make that lease agreement your own to match your needs.

A lawyer is not necessary to draw up a lease agreement for equipment unless you have specific legal questions on any of the clauses in the contract. Instead, you can buy or download templates for standard lease agreements and insert your particular conditions. As long as both parties read and agree to the terms, the contract can be signed and becomes a binding document.

 

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