By Edward P. Kaye, Esq. and Sloan Schickler, Esq.

When was the last time you did a full review of your lease and loan documentation? How about a partial review? Anyone?

If you are like most independent lessors, you are too busy running your daily operation to devote a day or two (or more) for a meaningful review of your loan and lease documents. Unfortunately, there are often real financial consequences to using outdated documentation, as many lessors find out the hard way.

Typically, lessors review documentation when a problem arises and the lessee quotes sections of the lease back to the lessor. Sometimes lessors can reply with other sections of the lease and quell a problem. But, most often, if a lessee is quoting sections of your lease to you, it is too late and it may result in lost profit or worse: actual losses.

Ostriches bury their heads in the sand because they think that if they cannot see a predator, the predator cannot see them. The fact that your lease documents have not been reviewed for years does not mean you do not have latent problems in your portfolio heading to the surface.

The good news is it is never too late to get your head out of the sand to review, update and revise what is arguably the backbone of your business. The lease agreement guides most, if not all, disputes with your customers, and clearly, it should be relevant to your current business practices and up to date with state and federal law. If you sell or syndicate portions of your portfolio, it is even more important to confirm that your lease is an asset and not a liability.

Recently, our firm has been contacted by several lessors and specialty finance companies requesting a review of their lease and loan documentation. Not surprisingly, we find sections that no longer apply to the business, complete sections of the business not covered in the lease, and other sections that are in violation of law. What is more, these are not small lessors. These are longstanding, successful companies with strong management in place and consistent proven track records of success.

Like many lessors, these leases were lifted from another company, borrowed from a friend in the business, and developed over time. Sections are added, revised and deleted by in-house operations people with good intentions but untrained drafting skills. The result can often be costly and in one case led to a class action lawsuit against the lessor.

Here are some provisions you may want to pay close attention to and seek advice of counsel to draft language that protects you.

  • Vehicle Acceptance – when does the lease start and what happens if the lessee rejects the vehicle?
  • Repairs and Maintenance – which party is responsible for specific repairs?
  • Vehicle alterations – is it permissible?
  • Late Fees – are they compliant with law?
  • Assignment – can the Lessor assign the lease?
  • Dispute Resolution – where do you want to litigate if you cannot resolve a dispute?
  • Prepayment Penalty – is there a right to prepay?
  • Usury – know the state law in your jurisdiction.

Reviewing lease documentation is not easy work. The agreements are often complex documents loaded with terms of art that require drafting skill and a clear understanding of the business model. In leasing, like all business, burying your head in the sand will not cure a problem. Find an attorney who understands your business and can review your documentation to make certain it is enforceable, compliant and up to date.

Sloan Schickler and Ed Kaye are partners in the vehicle finance law firm, Schickler Kaye LLP ( Schickler, a veteran vehicle leasing, finance, and bank attorney, has been the NVLA Legal and Legislative counsel since 2017 and currently sits on the board of directors. Kaye is the former CEO and General Counsel of a prominent independent vehicle leasing company and the immediate past president of the NVLA. He currently sits on the NVLA board of directors. Together, they provide decades of experience representing and protecting lessors and lenders in all facets of the vehicle leasing and financing business. They can be reached at, or 212-262-6400.

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