Lease Documentation & Contracts Flashcards

What is a 'cross-default' clause in a lease agreement?

Answer: A provision making default on one agreement trigger default on all agreements with the same party

A cross-default clause states that a default under one agreement with a lessee automatically constitutes a default under all other agreements with that lessee.

What does 'net lease' mean in terms of lessee responsibilities?

Answer: The lessee pays all operating expenses including taxes, insurance, and maintenance

In a net lease, the lessee bears all or most of the operating costs including property taxes, insurance, and maintenance, in addition to base rent.

What is an 'acceptance certificate' in equipment leasing?

Answer: A document signed by the lessee confirming receipt and acceptance of the equipment

An acceptance certificate is signed by the lessee to confirm that the equipment has been received, inspected, and is acceptable, triggering the start of the lease.

What is the significance of a 'non-cancellable' lease provision?

Answer: The lessee cannot terminate the lease before the end of the agreed term without penalty

A non-cancellable provision obligates the lessee to continue making payments for the full lease term and prohibits early termination without a termination fee.

In equipment leasing, what is a 'stipulated loss value' (SLV)?

Answer: The amount the lessee must pay if the equipment is lost, destroyed, or the lease is terminated early

Stipulated loss value is a contractually defined amount the lessee owes if the equipment is lost, stolen, or destroyed, or if the lease is terminated early.

What does 'assignment without recourse' mean in equipment leasing?

Answer: The assignee (e.g., a bank) cannot seek payment from the assigning lessor if the lessee defaults

When a lease is assigned without recourse, the assignee takes on all credit risk and cannot look to the original lessor for payment if the lessee defaults.