California Equipment Lease and Finance Attorney

True Leases, Finance Leases, and Disguised Security Interests

A threshold question in any equipment leasing transaction is whether the arrangement constitutes a true lease under Division 10 or is instead recharacterized as a disguised secured transaction subject to Article 9. The distinction affects the lessor's rights upon default, tax and accounting treatment, and the parties' relative positions in the lessee's bankruptcy. As UCC Article 2A counsel, LOAA advises lessors and lenders on the structural factors relevant to true lease versus security interest classification, including the relationship between rental payments and equipment value, the presence or absence of a nominal purchase option, and the allocation of residual-value risk between the parties.

Finance leases, a distinct category under Division 10, arise where the lessor's role is primarily that of a financing source rather than a party retaining meaningful equipment ownership risk — typically because the lessee selects the equipment and the lessor acquires it at the lessee's direction. Finance lease documentation commonly includes hell-or-high-water provisions obligating the lessee to make payments unconditionally regardless of equipment performance, together with an assignment or pass-through of supplier warranties from the equipment supplier to the lessee in lieu of lessor warranty obligations. LOAA drafts finance lease agreements addressing these provisions consistent with Division 10 requirements.

Equipment Lease Agreement Terms

As equipment lease agreement counsel, LOAA drafts and negotiates lease documentation addressing:

• Equipment schedules describing leased equipment, incorporated into master lease agreements for lessees or lessors engaged in recurring equipment transactions

• Acceptance certificates and rental commencement provisions establishing the point at which lease obligations begin

• Purchase options, and renewal and return provisions governing the equipment's disposition at lease-end

• Residual-value risk allocation between lessor and lessee

• Casualty loss and insurance requirements, including stipulated loss values

• Tax provisions addressing property tax, sales and use tax, and responsibility for tax filings

• Assignment provisions governing the lessor's ability to assign lease receivables or equipment interests to funding sources

• Default remedies available to the lessor, including acceleration, equipment repossession, and disposition of repossessed equipment

• Considerations arising in the lessee's bankruptcy, including lease assumption or rejection under the Bankruptcy Code

Equipment Repossession

Where a lease or financing default occurs, repossession of equipment raises considerations distinct from consumer repossession, including compliance with Division 10 and Article 9 requirements governing repossession, disposition of equipment following default, and application of proceeds. LOAA advises lessors and lenders as equipment repossession counsel in connection with default enforcement and equipment recovery.

Equipment Purchase Financing Under Article 9

Distinct from leasing, equipment purchase financing involves loans secured by equipment the borrower owns. As Article 9 documentation for these transactions, LOAA drafts and reviews:

• Security agreements creating a security interest in financed equipment

• Collateral descriptions sufficient to satisfy Article 9 requirements

• UCC-1 financing statements, including fixture filings where equipment is or will become affixed to real property

• Certificate-of-title collateral considerations for vehicles, aircraft, and other equipment subject to title-based perfection

• Priority analysis addressing purchase-money security interests and competing creditor claims

• Continuation statements maintaining perfection of filed security interests over time

Vendor Finance Programs and Master Lease Structures

LOAA advises equipment vendors, manufacturers, and finance companies on vendor finance program structures under which a finance company provides leasing or financing options to a vendor's customers at the point of sale. As vendor finance program counsel, the firm addresses program agreements between vendors and finance companies, master equipment lease agreement forms used across a vendor's customer base, and the allocation of credit and warranty risk within these programs. The firm also advises on lease lines of credit permitting lessees to draw down equipment financing over time under pre-negotiated terms, and progress-payment agreements addressing equipment financed or leased during manufacture or installation prior to delivery.



Sale-Leaseback Transactions

As sale leaseback counsel, LOAA advises businesses seeking to monetize owned equipment through sale-leaseback structures, in which equipment is sold to a lessor and simultaneously leased back to the seller. These transactions raise considerations regarding true lease characterization, tax treatment, and the interaction between the sale and leaseback documentation.



Portfolio Purchases and Due Diligence

LOAA represents buyers and sellers in the purchase and sale of equipment lease and loan portfolios. Portfolio transactions typically involve due diligence of lease and loan documentation, review of UCC filing positions and lien priority, assessment of equipment condition and residual value assumptions, and negotiation of assignment provisions and any consents required from lessees or account debtors. The firm conducts this due diligence and prepares the purchase and assignment documentation necessary to transfer lease and loan portfolios.



California Commercial Financing Disclosures

Certain equipment financing and lease-to-own arrangements fall within the scope of California's commercial financing disclosure requirements, which apply to specified categories of business-purpose financing under threshold amounts set by statute. Where a lease or financing transaction falls within the statutory definition, disclosure obligations addressing financing cost and payment terms may apply. For a discussion of these requirements, see the dedicated lease financing disclosure California page.



Legal Opinions on Licensing Status

LOAA provides legal opinions to individuals and businesses evaluating whether a given activity requires a California financial regulatory license, and under which classification. These opinions examine the services provided, the compensation structure, the relationship between the parties, and applicable statutory definitions and exemptions, and may serve as a documented basis for the client's compliance position.

Mergers, Acquisitions

LOAA handles mergers and acquisitions transactions involving equipment leases, representing buyers, sellers, lessors, and lessees in transactions where equipment lease portfolios constitute significant assets. Equipment lease portfolio acquisitions require comprehensive due diligence examining lease documentation, lessee creditworthiness, equipment condition and values, regulatory compliance, and financial performance. The firm conducts legal due diligence, negotiates acquisition agreements, and addresses assignment requirements and lessee consents necessary to transfer lease portfolios.

Disclaimer: The information on this page is provided for general informational purposes only and does not constitute legal advice. No attorney-client relationship is created by reading this content. Every legal matter is unique, and you should consult directly with a qualified attorney regarding your specific circumstances.

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