The remaining equipment leasing glossary is below between the letter 'L' and 'Z.'
Landlord Waiver
A document prepared by the Lessor which is signed by the Lessee's landlord which gives up any rights he may have in the leased equipment at the Lessee's place of business. This waiver allows the Lessor to remove the equipment in case of default or at end of lease. It also protects the Lessor in cases where leased equipment is attached to real property.
Lease Commencement
The Lease Commencement Date is the date equipment is accepted by the Lessee as evidenced by Lessee's execution of an Acceptance Certificate.
Lease Proposal
A written agreement between the Lessor and Lessee that outlines the basic terms and conditions of a specific lease transaction. Both parties sign this proposal, and it is subject to credit approval.
Lease Rate
The simple equivalent interest rate excluding depreciation and residual, if any.
Lessee
A party who makes use of property owned by another party (the Lessor) and pays the Lessor, usually in the form of rentals, for that use.
Lessor
Company or leasing entity that is legal owner of the leased equipment.
Level Payments
Equal payments over the term of the Lease.
Master Lease
An open-ended lease agreement under which a Lessee obtains the use of specific property and can add additional equipment periodically. Eliminates signing new leases as additional equipment is leased.
Net Lease
With a Net Lease, the rentals are payable to the Lessor. All costs in connection with the use of the equipment are to be paid by the Lessee and are not a part of the rental. For example, taxes, insurance, and maintenance are paid directly by the Lessee.
Pre-Funding
Many vendors require that they be paid at least 50% of the invoice amount once the lease is funded. This is called prefunding. It must be approved by the funding source. For Pre-Funding to be accepted, both the vendor and lessee must be stable for acceptance.
Security Deposit
A Security Deposit is an advance payment that is usually equal to two lease payments,. This deposit is retained by the Lessor for the term of the Lease. If the lease is never finalized for reasons that are not the fault of the Lessor, the deposit will be kept by the Lessor for administrative costs. If any part of the deposit is remaining at the end of the Lease term and the Lessee has completed all of his / her obligations, the Deposit is returned to the Lessee or can be applied to the Purchase Option, if any, or to any remaining payments.
Soft Costs
Freight, software, labor and other intangible items are frequently defined as soft costs. Many funding sources will only allow a certain percentage of the total transaction to be soft costs. Because these costs can generally not be recovered in case of default, they increase the inherent risk of the lease.
True Lease
A True Lease is a transaction that qualifies as a lease under the Internal Revenue Code. This lease functions so that the Lessee can claim rental payments as tax deductions and the Lessor can claim tax benefits of ownership such as depreciation.
Uniform Commercial Code
A standardized program and method of administering, legalizing and recording lien instruments adopted now by all states except Louisiana.
Useful Life
The period of time during which an asset will be usable and have some economic value. To qualify as an operating lease, the property must have a remaining useful life of 25 percent of the original estimated useful life of the leased property at the end of the lease term, and life of at least one year.
