It has become imperative to bring to the fur the negative impact of equity contributions in leasing transactions and to alert you of its consequences on your investment.
Perhaps to have the commitment of the customer, many lessors ask for equity contribution from the customer, while this is not illegal, it connotes a different transaction entirely, which is not leasing. By its legal nature, leasing does not envisage any proprietary right on the lessee during the entire duration of the lease, the lessor remains owner of the leased asset. This ownership status confers on the lessor the right to repossess the asset in the event of default.
Therefore inserting equity contribution in your documentations, implies joint ownership and in the event of default, it is doubtful if you as the lessor will be allowed to exercise the right of repossession, since the asset does not solely belong to you. This is even made worst in some cases where the purchase receipt is written in the name of both of you, the lessor and lessee.
The effect of equity contribution can be achieved with appropriate structuring techniques. For instance, the intended amount of contribution can be paid as advanced rentals and this can as a matter of fact increase the yield on the transaction.
In order to protect your business and enhance professionalism, we advise that you ensure compliance with this and join other experts for this and many more expositions on using the appropriate model ELAN has developed ensure effective protection and enhanced yield in lease transactions. Attend our session on the ELAN calculator and how to use advance rentals to increase your yield, Thursday 21st September 2017 @ ELAN Training Centre, 25B Fola Jinadu Crescent,m Gbagada – Lagos For further engagement on this you may wish to call. 089023176691.