Document type: Toolkit Practice area: Commercial — Equipment Finance Jurisdiction: United States Last reviewed: 5 September 2026

Tool 1 — Lease schedule

The schedule is the lease. The master agreement states terms; the schedule creates the transaction, and the characterization analysis applies to it.

EQUIPMENT SCHEDULE NO. [__] to Master Lease Agreement dated [__] between [Lessor] and [Lessee]

1. Equipment. [Description, manufacturer, model, serial numbers, quantity — sufficient to identify.] Location: [address].

2. Supplier. [Name and address.] Total Cost: $[__].

3. Term. Base Term: [60] months, commencing on the Acceptance Date. Interim Period: from funding to the Acceptance Date, at Interim Rent of $[__] per day.

4. Rent. $[__] per month, in advance, on the [first] day of each month.

5. End of Term Options. Not less than [90] days and not more than [180] days before the Expiration Date, Lessee may give irrevocable written notice electing to: (a) return the Equipment in accordance with Section [] of the Master Lease; (b) renew for [12] months at Fair Market Rent, determined under Section []; or (c) purchase the Equipment for its Fair Market Value determined as of the Expiration Date under the appraisal procedure in Section [__], provided that such purchase price shall not exceed [35]% of Total Cost.

If Lessee gives no notice, this Schedule shall automatically renew on a month-to-month basis at the Rent then in effect, terminable by either party on [30] days' notice.

6. Stipulated Loss Values. As set out on Annex A.

7. Insurance. Property: not less than $[], Lessor as loss payee. Liability: not less than $[], Lessor as additional insured.

8. Finance Lease. This Schedule is a finance lease as defined in Article 2A. Lessee acknowledges receipt, before signing, of [a copy of the Supply Contract / the statement of Supplier's warranties attached as Annex B].

9. Incorporation. The Master Lease is incorporated. In the event of conflict, this Schedule governs.

Annotations.

  • Section 5 carries the characterization. Fair market value determined at exercise is expressly not nominal under the Code. The cap preserves that while giving the lessee certainty — set it at or above the predicted residual.
  • The month-to-month automatic renewal in Section 5 is the lessee-favourable version. The lessor's standard form usually renews for twelve months, which is where lessees lose the most money.
  • Section 8's acknowledgment satisfies the finance lease disclosure limb, which is what secures the warranty disclaimer and the statutory hell or high water treatment. One sentence and one annex.
  • Section 3's interim period handles the gap between funding and acceptance for equipment requiring installation.

Tool 2 — Finance lease designation and warranty disclaimer

FINANCE LEASE. Each Schedule designated as such is a "finance lease" as defined in Section 2A-103(1)(g) of the Uniform Commercial Code. Lessee acknowledges that: (a) Lessor did not select, manufacture, or supply the Equipment; (b) Lessor acquired the Equipment or the right to possession and use of it in connection with this Lease; and (c) before signing the applicable Schedule, Lessee received [a copy of the Supply Contract / an accurate and complete statement of the promises and warranties made to Lessor by the Supplier, and of Lessee's rights against the Supplier], and had an opportunity to review it.

DISCLAIMER OF WARRANTIES. LESSOR IS NOT A MANUFACTURER, SUPPLIER, OR DEALER IN THE EQUIPMENT. LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING THE CONDITION, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE EQUIPMENT, OR THE ABSENCE OF ANY INFRINGEMENT. LESSEE LEASES THE EQUIPMENT "AS IS."

SUPPLIER WARRANTIES. Lessor hereby assigns to Lessee, to the extent assignable, all warranties, indemnities, and other rights Lessor has against the Supplier with respect to the Equipment, and shall, at Lessee's request and expense, take such further action as Lessee reasonably requests to enable Lessee to enforce them. So long as no Event of Default exists, Lessee may exercise such rights directly.

Annotations.

  • Clause (c) is the operative one, and it must be satisfied in fact before the schedule is signed — attaching the warranty summary as an annex and referencing it is the cheapest method.
  • The disclaimer must be conspicuous. Capitals or bold, and set apart.
  • The assignment of supplier warranties is not optional in substance. The finance lease structure works because the lessee has real recourse against the supplier; a disclaimer without an effective assignment leaves the lessee with nothing and invites a court to decline to enforce hell or high water.
  • A captive lessor affiliated with the manufacturer is not a finance lessor, and these provisions do not secure the statutory treatment for it — the disclaimer and the hell or high water clause then stand or fall on contract law alone.

Tool 3 — Hell or high water

ABSOLUTE AND UNCONDITIONAL OBLIGATION. Lessee's obligation to pay Rent and all other amounts payable hereunder is absolute and unconditional and shall not be subject to any abatement, reduction, setoff, defense, counterclaim, interruption, deferment, or recoupment for any reason whatsoever, including: (a) any defect in, damage to, destruction of, loss of, theft of, or interference with the use of the Equipment; (b) any failure of the Equipment to conform to the Supply Contract or to any specification, or any failure of the Supplier to perform; (c) the insolvency, bankruptcy, or breach of the Supplier, Lessor, or any other person; (d) any claim Lessee may have against the Supplier, Lessor, or any other person; (e) any prohibition or restriction on Lessee's use of the Equipment; (f) the invalidity or unenforceability of any provision hereof; or (g) any other cause or circumstance whatsoever, whether or not foreseeable or similar to the foregoing.

Lessee's sole recourse in respect of the Equipment is against the Supplier, and Lessee shall pursue any such claim without abating any amount payable hereunder.

Nothing in this Section waives any claim Lessee may have against Lessor for Lessor's own breach, but any such claim shall be pursued separately and shall not be asserted as a defense, setoff, or counterclaim against amounts payable hereunder.

Annotations.

  • The statutory basis exists only for a finance lease that is not a consumer lease. In other leases the clause is contractual, and courts enforce it between sophisticated commercial parties with less deference.
  • The final paragraph is the compromise that makes the clause defensible. A clause purporting to eliminate the lessee's claims entirely, including against the lessor for its own fraud or breach, invites a court to refuse enforcement. Preserving the claim while barring it as a defense achieves the lessor's commercial objective — a clean payment stream — without overreaching.
  • The clause does not survive lessor fraud, and courts have declined to enforce it where the lessor participated in the supplier's misconduct.
  • For the lessee, the response is not to fight the clause — it is unwinnable — but to secure real recourse against a creditworthy supplier.

Tool 4 — Certificate of acceptance

CERTIFICATE OF ACCEPTANCE — Schedule No. [__]

Lessee certifies that:

  1. The Equipment described on Schedule No. [__] has been delivered to the Location, inspected by Lessee, [installed, and successfully tested in accordance with the Acceptance Criteria set out on Annex C,] and is in good order and condition;
  2. The Equipment conforms to the specifications in the Supply Contract and is satisfactory to Lessee in all respects;
  3. Lessee has had a reasonable opportunity to inspect and test the Equipment;
  4. Lessee received, before signing the Schedule, [a copy of the Supply Contract / the statement of Supplier's warranties];
  5. Lessee irrevocably accepts the Equipment for all purposes of the Lease; and
  6. Lessee's obligations under the Lease are now absolute and unconditional in accordance with Section [__].

Acceptance Date: ______ Executed by: ______ Title: ______ (Must be an officer or a person holding written authority under Annex D.)

Annotations.

  • This is the most consequential document the lessee signs, and it is routinely executed at a loading dock by someone who has not read the lease.
  • The bracketed installation and testing language in paragraph 1, and the Annex C acceptance criteria, are the lessee's protection — negotiate them, define the test, and tie acceptance to it.
  • The signature authority requirement in the footer is worth insisting on from both sides: the lessor wants certainty that the signature binds, and the lessee wants the signature given by someone who understands what it does.
  • Paragraph 4 is what evidences satisfaction of the finance lease disclosure limb.

Tool 5 — Stipulated loss value schedule

ANNEX A — STIPULATED LOSS VALUES

The Stipulated Loss Value for any Rent Payment Date is the percentage of Total Cost set out below, applicable to the Rent Payment Date on which the relevant event occurs.

Payment No. % of Total Cost Payment No. % of Total Cost
1 104.0% 31 62.5%
6 98.5% 36 55.0%
12 90.0% 42 47.5%
18 81.5% 48 41.0%
24 73.0% 54 35.0%
30 64.0% 60 30.0%

Application. Upon a Casualty Loss or an Event of Default, Lessee shall pay: (a) all Rent and other amounts then due; plus (b) the Stipulated Loss Value for the applicable date; less (c) the net proceeds actually received by Lessor from any insurance in respect of the Casualty Loss, and from any sale, re-lease, or other disposition of the Equipment, in each case net of Lessor's reasonable costs of repossession, storage, refurbishment, and disposition.

Upon payment in full, title to the Equipment (or Lessor's remaining interest) shall pass to Lessee, without warranty other than as to Lessor's title.

The parties agree that these amounts are a reasonable estimate of Lessor's anticipated harm and are not a penalty.

Annotations.

  • Clause (c) is essential. Article 2A permits liquidated damages reasonable in light of the anticipated harm at contracting — a friendlier standard than Article 2's — but a schedule that lets the lessor recover the full stipulated amount and keep the equipment or its proceeds will be attacked as a windfall. Credit the proceeds.
  • The final table value should approximate the assumed residual at the end of the term, which is how the schedule ties to the characterization analysis.
  • The title transfer sentence is what makes the clause a genuine liquidation rather than a double recovery.
  • Deduct Lessor's disposition costs, or the lessor bears them twice.

Tool 6 — Precautionary filing and backup security grant

In the lease:

CHARACTERIZATION; PRECAUTIONARY GRANT. The parties intend each Schedule to be a true lease and not a sale or a transaction creating a security interest, and to be treated as such for all purposes.

However, if any Schedule is determined to create a security interest, Lessee hereby grants to Lessor a security interest in the Equipment described therein, all accessions, additions, replacements, and substitutions, all proceeds (including insurance proceeds), and all books and records relating thereto, to secure the payment and performance of all obligations of Lessee under the Lease, and each Schedule shall constitute a security agreement under the Uniform Commercial Code.

Lessee authorizes Lessor to file financing statements describing the Equipment, and Lessee agrees that such filings are made for precautionary and informational purposes and shall not be construed as evidence that any Schedule is other than a true lease.

On the financing statement:

Additional information / Optional filer reference: This financing statement is filed for precautionary and informational purposes in connection with a lease transaction that the parties intend to be a true lease. The filing is not intended as, and shall not be construed as, an admission that the transaction creates a security interest.

Annotations.

  • Both pieces are required. A filing without a grant perfects nothing; a grant without a filing is unperfected.
  • Neither prejudices the true lease characterization. The Code expressly permits precautionary filings and provides that such a filing does not of itself create a security interest.
  • Search first. A precautionary filing behind a bank's blanket lien on "all equipment" is a subordinate position on recharacterization. Obtain a release or subordination as to the leased equipment — this is the step most often skipped and the one that costs the most.
  • File in the state of organization, with the debtor's exact name from the public organic record.
  • Continuation before the five-year lapse.

Tool 7 — End-of-term options and the appraisal mechanism

FAIR MARKET VALUE DETERMINATION. "Fair Market Value" means the price a willing buyer would pay a willing seller, neither under compulsion, for the Equipment in place and in use at the Location, on an as-is where-is basis, assuming the Equipment has been maintained in accordance with the Lease.

Procedure. Within [15] days after Lessee's notice, each party shall appoint an independent appraiser with not less than [five] years' experience appraising equipment of the type. Each appraiser shall deliver a written appraisal within [30] days. If the two appraisals differ by [10]% or less of the higher, Fair Market Value is their average. If they differ by more, the two appraisers shall within [10] days appoint a third, whose appraisal shall be delivered within [30] days and whose determination shall be final and binding, provided it is not higher than the higher nor lower than the lower of the first two.

Costs. Each party bears its own appraiser; the third appraiser's fee is shared equally.

Cap. Notwithstanding the foregoing, the purchase price shall not exceed [35]% of Total Cost.

RETURN CONDITIONS. Upon return, the Equipment shall be: (a) in the condition required by the maintenance covenant, ordinary wear and tear excepted; (b) free of Lessee's markings and of any liens; (c) accompanied by all manuals, keys, tooling, and software licences supplied with it; (d) [certified by the manufacturer or an authorized service provider as being in good operating condition, at Lessor's cost]; and (e) delivered, at Lessee's cost, to a location designated by Lessor within [500] miles of the Location, or, if farther, with freight in excess of $[__] at Lessor's cost.

Annotations.

  • A fair market value option without a mechanism is a negotiation with no leverage, because the lessee's alternative is the return conditions. The appraisal procedure is the single most valuable end-of-term term for a lessee.
  • "In place and in use" produces a materially higher value than "removed"; the standard should be stated and negotiated.
  • The recertification allocation and the freight cap are where return costs live. Lessees routinely budget zero for return and pay six figures.
  • "Ordinary wear and tear excepted" is the difference between returning a used machine and refurbishing one.

Tool 8 — Remedies

REMEDIES. Upon an Event of Default, Lessor may, at its option, do any one or more of the following:

(a) declare all Rent and other amounts then accrued and, at Lessor's election, the Stipulated Loss Value, immediately due and payable; (b) cancel any or all Schedules; (c) take possession of the Equipment, wherever located, without judicial process if this can be done without breach of the peace, or by action, and for such purpose enter any premises where the Equipment is located, and Lessee shall assemble the Equipment and make it available at a place designated by Lessor; (d) sell, re-lease, or otherwise dispose of the Equipment, at public or private sale, in a commercially reasonable manner, on [10] days' prior notice to Lessee, and apply the net proceeds against Lessee's obligations; (e) recover damages equal to accrued Rent plus the present value of Rent for the remaining Term, discounted at [__]%, less the present value of the market rent for the remaining Term, plus incidental damages; (f) proceed by appropriate action to enforce performance or recover damages; and (g) exercise any other right or remedy available at law or in equity.

Cumulative. Remedies are cumulative and may be exercised concurrently. No delay or omission is a waiver.

Costs. Lessee shall pay Lessor's reasonable costs of enforcement, including attorneys' fees, repossession, storage, refurbishment, and disposition.

Mitigation. Lessor shall use commercially reasonable efforts to sell or re-lease the Equipment, and shall credit the net proceeds as provided above. Lessor shall not be required to sell or re-lease at a particular time or price.

Annotations.

  • Clause (c)'s "without breach of the peace" is not optional; self-help repossession that breaches the peace is a conversion, and the standard is applied strictly. Entry over objection, threats, deception, and the appearance of official authority all breach it.
  • Clause (d)'s commercial reasonableness and notice should be included even in a true lease, where Article 9 technically does not apply, because it is cheap and it protects against recharacterization.
  • The mitigation paragraph is the lessor's protection against an argument that it sat on the equipment, and the final sentence is its protection against second-guessing of timing.
  • Document the disposition process. Lessors lose deficiency claims by selling to an affiliate with no marketing.

Tool 9 — Landlord waiver

LANDLORD WAIVER AND CONSENT

[Landlord], landlord of the premises at [address] leased to [Lessee], acknowledges that [Lessor] has leased to Lessee the equipment described on Exhibit A (the "Equipment"), and agrees:

  1. The Equipment is and shall remain personal property, notwithstanding its manner of attachment, and shall not be deemed a fixture or part of the realty.
  2. Landlord waives and releases any lien, claim, right of distraint, or interest in the Equipment, whether arising by statute, contract, or otherwise, and subordinates any such interest to Lessor's.
  3. Landlord shall permit Lessor, on reasonable notice, to enter the premises to inspect, repair, or remove the Equipment, and shall permit removal for a period of [60] days after the later of Lessor's notice and Landlord's recovery of possession. Lessor shall pay rent at the then-applicable rate for any period of its actual occupancy and shall repair damage caused by removal, ordinary wear excepted.
  4. Landlord shall give Lessor written notice of any default by Lessee under the real property lease and a reasonable opportunity to remove the Equipment before terminating or taking possession.

Annotations.

  • Paragraph 1 matters for equipment that could be characterized as a fixture — and where it could, obtain a mortgagee waiver as well, since a mortgagee's interest in fixtures can prime.
  • Paragraph 3's period and rent obligation are the negotiation. Under 30 days is not useful.
  • Paragraph 4 protects the lessor from a lease termination it does not learn about.
  • Send these in the first week of documentation, not at closing. Landlords have no incentive to move quickly.

Tool 10 — Lessee estoppel certificate (for an assignee)

LESSEE ACKNOWLEDGMENT AND ESTOPPEL

Lessee acknowledges and certifies to [Assignee] that, as of the date hereof:

  1. The Lease and Schedule No. [__] are in full force and effect and have not been amended except as listed;
  2. Lessee has accepted the Equipment described therein and it is in good order and condition;
  3. Rent commenced on [date]; the Rent is $[] per month; Rent has been paid through [date]; and no Rent has been prepaid except [];
  4. No default exists under the Lease and no event has occurred that with notice or lapse of time would constitute a default;
  5. Lessee has no claim, defense, setoff, or counterclaim against Lessor under or in respect of the Lease;
  6. Lessee acknowledges the assignment of the Lease to Assignee, agrees to pay all amounts to Assignee at [address], and agrees that payment to Lessor after receipt of this notice shall not discharge Lessee's obligations;
  7. Lessee's obligations to Assignee are absolute and unconditional in accordance with Section [__]; and
  8. Assignee has assumed no obligations of Lessor, provided that Assignee agrees that Lessee's quiet enjoyment shall not be disturbed so long as no Event of Default exists.

Annotations.

  • Paragraphs 5 and 7 are why the assignee requires the certificate — they confirm the payment stream is clean.
  • Paragraph 8's quiet enjoyment sentence is the lessee's protection and should be insisted on. A lessee whose lease has been assigned to a funding source it has never dealt with needs assurance that its use will not be disturbed.
  • Paragraph 6's payment instruction matters practically: payment to the original lessor after assignment does not discharge the obligation, and lessees pay the wrong party regularly.

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