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Drafting Equipment Leases: UCC Article 2A Compliance, Minimizing Risk Through Key Provisions and Clarity

Recording of a 90-minute CLE webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Wednesday, June 5, 2019

Recorded event now available

or call 1-800-926-7926

This CLE course will discuss the pros and cons of equipment leasing and guide counsel in structuring, drafting, analyzing, and negotiating effective commercial equipment leases. The panel will discuss UCC Article 2A considerations, the implications of re-characterization as a sale or a security interest, and important clauses and drafting suggestions to facilitate a lease that best serves the business purposes of the parties.


Leasing and financing are essential to large and small businesses so that they may acquire use or ownership of the capital equipment, related services, and other business solutions necessary to conduct business. Businesses acquiring these assets rely on rental companies, lessors and equipment financing providers to facilitate their acquisitions.

The 2008-2009 economic downturn motivated equipment users to seek alternatives to conventional financing. Having realized that leasing enables them to conserve available cash as well as borrowing capacity, they have elected to lease, rather than purchase, in progressively greater numbers. In fact, leased machines now outnumber owned machines on U.S. construction sites.

Leasing also enables users to avoid technological obsolescence and other ownership-related risks while retaining the flexibility to purchase the equipment or extend the lease in many cases. Most importantly, leasing enables users to match use requirements to financing requirements more efficiently by, among other things, allowing for duration flexibility. Thus, the total of the payments due under a lease may be considerably less than might be payable under a loan because: (1) the rent and other economic terms are likely to be “priced” to reflect the lessor’s reliance on the residual value of the equipment as well as certain federal tax benefits; and (2) the lease expiration date can be matched to the anticipated completion date of a construction project.

But equipment leasing and finance is a specialty practice, and counsel who understand the pertinent commercial law and market approaches will find it easier to evaluate the legalities and practical implications of the related transaction documents. For example, UCC Article 2A provides many advantages to lessors under a true “lease,” both as to certainty of payment by the lessee and preserving the lessor’s interest in the equipment. Counsel who understand the various provisions of UCC Article 2A will align the provisions of the lease documents to optimize the benefits afforded by those laws. Equipment leases can present unique issues. It is, therefore, vital that practitioners drafting such documents address all issues that may arise to prevent misunderstandings and reduce the likelihood of disputes.

Market practices regarding the various types of equipment finance transactions often dictate the allocation of risks and benefits in the related documents. The approach regarding the accepted allocation of these risks and benefits may differ depending on, among other things, the size of the transaction, the equipment type, and the customer’s anticipated use of the equipment. The anticipated accounting treatment and depreciation benefits under U.S. federal income tax law, must also be considered when structuring and documenting a lease transaction. In many cases, lessees prefer to rely on equipment lessors to also provide delivery, maintenance, servicing, parts support, software, and critically, financing solutions.

Listen as our veteran panel of equipment lease attorneys provides practical guidance regarding the considerations for counsel representing parties to equipment leases. The panel will provide their perspectives regarding structuring, analyzing and negotiating these transactions, and will focus on drafting strategies when documenting the essential provisions typically included in the related documents.



  1. Overview
  2. Examples of equipment leases and financings
    1. Rental agreements
    2. Equipment financings; leases (leases and non-leases), installment sale/financing agreements, etc.
    3. Vendor financings; “bundled transactions”, MES and tech solutions financings, etc.
  3. Lessor and lessee business considerations
    1. Lessor – economic/pricing (including certainty of payment), credit, syndication/capital markets, collateral and residual related, avoidance of liability, regulatory compliance, market considerations, etc.
    2. Lessee – cost, operational flexibility, obsolescence and other value risks, accounting and tax treatment, compliance with organizational documents and lending and other contract restrictions, etc.
  4.  Applicable law
    1. UCC
      1. Characterization; is it a true “lease”?
      2. True leases vs. non-true leases; why it matters.
    2. Other Legal considerations
      1. Other commercial law (UCC Articles 1, 2 and 9), contract and general corporate law
      2. Federal, state and local tax laws
      3. Regulatory considerations; including, related to lessor/financier, customer, equipment, economic terms, etc.
      4. Tort law
      5. Bankruptcy
      6. IP, environmental, insurance, dispute resolution, securities, etc.
  5. Lease drafting considerations
    1. Equipment description, delivery and acceptance, inspection of equipment before delivery and upon return (if applicable)
    2. Term, options and return; including, commencement, expiration, and options prior to and upon expiration
    3. Rent; including, “net” lease/hell or high water
    4. Sales, use and other taxes; including, reporting and paying
    5. Operation, maintenance and return; equipment-specific requirements
    6. Insurance; required casualty and liability coverages
    7. Risk of loss or damage; repair, replace or prepay
    8. Disclaimers of warranties and indemnifications
    9. Representations and warranties; general and transaction-specific
    10. Conditions precedent; including, corporate, equipment-related and priority
    11. Credit-related terms; including, financial reporting and corporate restrictions, personal guarantees.
    12. Defaults and remedies; including, repossession and damages
    13. Rights and restrictions regarding assignments and other dispositions; regarding lessee vs. lessor
    14. Execution, electronic signatures, etc.
    15. “Boilerplate”; "integration" clauses, choice of law, venue, dispute resolution, further assurances, fees and costs, etc.


The panel will review all these issues and more:

  • Attendees will fully understand the differences between a true lease and lease that creates a security interest, and the consequences of each.
  • Attendees will learn the key issues to address in negotiating and drafting an equipment lease.
  • The panel will provide practical drafting strategies and insight into common mistakes and how proper drafting can reduce the likelihood of disputes and offer significant advantages if disputes arise.


Cohen, Mark
Mark Cohen, J.D., LL.M.

Cohens Law

Mr. Cohen has 36 years of experience as a lawyer. His practice focuses on drafting and reviewing legal documents,...  |  Read More

Waite, James
James R. Waite

Of Counsel
Robinson Waters & O'Dorisio

Mr. Waite brings more than 20 years of experience in equipment leasing and financing, corporate law, real estate,...  |  Read More

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