A lessor should take a close look at all of his options in the event of a lessee’s default. It might be an easy choice to simply send out a default notice, hoping the lessee will catch up the missed payments, but it may not be the most beneficial option for the lessor in the long run.
If a lessee seeks bankruptcy protection, the lease assumption and rejection provisions of the Bankruptcy Code can complicate matters. Lessors in this position may wish they had opted to demand return of the equipment months earlier Terminating a lease is not always a foolproof way to strip a bankrupt lessee of any interest in the leased equipment, but doing so generally puts the lessor in a better starting position should the lessee file a bankruptcy petition.
Terminating the lease and demanding return or accelerating the balance should be among your options in the event of a lessee’s default. If these options are not part of your standard lease agreement, then it’s time to have your lease rewritten to include all reasonable options in the event of default.
We’ve written several articles recently about the expected growth in popularity of equipment leases, including growth anticipated by the airline, railroad, over the road transportation, and IT industries. Some of the larger participants have already taken steps to be ready to absorb the expected growth. Don’t wait to get your company into position as well.
The attorneys at Glass & Goldberg provide high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law, including reviewing, structuring and implementing complex leases. Call us at (818) 888-2220, email us at firstname.lastname@example.org, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.