When Is Equipment Not 'Equipment'? Inventory Leasing or Leasing to Rental Companies

It is not unusual for a finance lessor to discover that its Lessee intends to enter into a contract with a third party whereby the Lessee delivers possession of the leased equipment to that third party. Although many finance lessors may be aware of the practical risks associated with having its leased property/collateral in the hands of a third party, many are unaware of the increased legal risks that result from such a situation. This article addresses some of the key issues. For the sake of clarity, the third party receiving possession and control of the leased equipment will be referred to as a 'Sublessee,' and the agreement between the Lessee and the Sublessee will be referred to as a 'Sublease.' It should be noted that a contract of service pursuant to which the Sublessee receives possession also constitutes a 'Sublease' for purposes of this article.

15 minute read September 29, 2006 at 10:24 AM

By

Ken Weinberg and Barry S. Marks