Lease Agreement - Equipment (New York)

EQUIPMENT LEASE AGREEMENT — STATE OF NEW YORK

True lease / finance lease governed by N.Y. U.C.C. Article 2-A, with New York-specific provisions for hell-or-high-water clauses, sales tax treatment under N.Y. Tax Law §§ 1101 and 1115, and New York lessor remedies.

NEW YORK DRAFTING NOTES

☐ True Lease vs. Disguised Financing. If the lease is intended as a "true lease" under N.Y. U.C.C. § 1-203, carefully avoid characterization as a security interest. Indicia of disguised sale include: (i) the lease is non-cancellable and the lessee must pay the total residual value; (ii) the lessee has an option to purchase for nominal consideration; (iii) the original lease term equals or exceeds the useful life of the equipment.

☐ Finance Lease Status. For § 2-A-407 "hell or high water" protection, the lease must qualify as a "finance lease" under N.Y. U.C.C. § 2-A-103(1)(g): (i) the lessor does not select, manufacture, or supply the goods; (ii) the lessor acquires the goods in connection with the lease; and (iii) the lessee receives a copy of the supply contract or specific information about supplier warranties.

☐ Precautionary UCC Filing. Even for a true lease, N.Y. U.C.C. § 9-505 (precautionary filing) permits the lessor to file a UCC-1 with the New York Department of State to provide notice without prejudice to the lease's true-lease status.

☐ N.Y. Sales and Use Tax. Under N.Y. Tax Law § 1101(b)(5), "receipts" from equipment leases are generally taxable at the state and local sales tax rates in effect where the equipment is located. Lessor should obtain Lessee's resale/exemption certificate where applicable.

☐ Commercial Reasonableness of Remedies. Disposition of repossessed equipment must be commercially reasonable under N.Y. U.C.C. § 2-A-527. Failure to comply may reduce the deficiency judgment.

☐ Jury Waiver. New York appellate authority permits parties to expressly waive jury trial by written agreement. Tiffany at Westbury Condominium v. Marelli Development Corp., 34 A.D.3d 791, 792 (2d Dep't 2006).

1. PARTIES AND DATE

This Equipment Lease Agreement (this "Lease") is entered into as of [__/__/____] (the "Effective Date") by and between:

Lessor: [________________________________], a [State] [entity type] with its principal place of business at [________________________________] ("Lessor"); and

Lessee: [________________________________], a [State] [entity type] with its principal place of business at [________________________________] ("Lessee").

2. RECITALS AND CHARACTERIZATION

A. Lessor is the owner (or, in the case of a finance lease, has acquired title for the purpose of leasing) of the equipment described in Schedule 1 (the "Equipment").

B. The parties intend this Lease to constitute:

☐ A true lease under N.Y. U.C.C. § 1-203 and not a disguised sale or security interest.

☐ A finance lease under N.Y. U.C.C. § 2-A-103(1)(g). Lessee acknowledges that (i) Lessor did not select, manufacture, or supply the Equipment; (ii) Lessor acquired the Equipment or its right to possession and use in connection with this Lease; and (iii) Lessee has received, before signing this Lease, a complete statement identifying the supplier and the warranties and other rights provided by the supplier pursuant to N.Y. U.C.C. § 2-A-209 and § 2-A-211.

C. Lessor and Lessee agree as follows.

3. LEASE OF EQUIPMENT

3.1 Lessor leases to Lessee, and Lessee leases from Lessor, the Equipment described in Schedule 1, subject to this Lease.

3.2 Lease Term. The initial term commences on the Commencement Date (defined in the Acceptance Certificate, Exhibit A) and continues for [____] months (the "Initial Term"). Renewal terms of [____] months each (each a "Renewal Term") shall occur automatically unless either party delivers written non-renewal notice at least [____] days before expiration.

3.3 Delivery and Acceptance. Lessor shall deliver the Equipment to Lessee at [________________________________] on or before [__/__/____]. Under N.Y. U.C.C. § 2-A-219(1), risk of loss remains with Lessor in a non-finance lease and passes to Lessee in a finance lease, unless the Lease lawfully allocates risk otherwise. If risk is to pass and the time is not stated, § 2-A-219(2) supplies different rules for carrier shipments, destination contracts, bailees, receipt, and tender. Selected allocation: [________________________________]. Lessee shall execute and return the Acceptance Certificate in the form of Exhibit A within [____] Business Days or otherwise notify Lessor in writing of any non-conformity; failure to do either constitutes acceptance only to the extent provided by § 2-A-515 and other applicable law.

4. RENT AND PAYMENT

4.1 Rent. Lessee shall pay rent in the amounts and on the dates set forth in Schedule 2, payable by wire transfer or ACH in immediately available U.S. dollars to the account designated by Lessor.

4.2 Hell or High Water Clause. Pursuant to N.Y. U.C.C. § 2-A-407, LESSEE'S OBLIGATIONS UNDER THIS LEASE ARE ABSOLUTE, UNCONDITIONAL, AND NON-CANCELLABLE AND ARE NOT SUBJECT TO SETOFF, COUNTERCLAIM, RECOUPMENT, DEFENSE, OR OTHER RIGHT OF WITHHOLDING, IRRESPECTIVE OF ANY BREACH OR ALLEGED BREACH BY LESSOR OR THE SUPPLIER, OR ANY OTHER EVENT OR CAUSE WHATSOEVER, INCLUDING EQUIPMENT DEFECTS, LOSS, OR DESTRUCTION. Lessee's remedies, if any, are solely against the supplier.

4.3 Late Charges. Any Rent not paid within [five (5)] Business Days of the due date accrues a late charge of one and one-half percent (1.5%) per month, not to exceed the maximum lawful rate.

4.4 Sales and Use Tax. Lessee shall pay all applicable New York State and local sales and use taxes imposed on the Rent under N.Y. Tax Law §§ 1101(b)(5) and 1115, and shall provide Lessor with a valid resale or exemption certificate where applicable. Lessee shall also pay personal property taxes, licensing fees, and other assessments relating to the Equipment.

5. USE, MAINTENANCE, AND INSURANCE

5.1 Use. Lessee shall use the Equipment solely in the ordinary course of its business, in accordance with manufacturer specifications and all applicable laws (including New York Labor Law, OSHA, and PESH).

5.2 Location. The Equipment shall be kept at [________________________________] in New York State and may not be relocated without Lessor's prior written consent.

5.3 Maintenance. Lessee shall, at its sole expense, maintain the Equipment in good operating condition, perform all manufacturer-recommended maintenance, and keep the Equipment in compliance with all applicable New York regulations.

5.4 Insurance. Lessee shall maintain:
a. All-risk property insurance covering the Equipment for not less than full replacement cost, naming Lessor as loss payee;
b. Commercial general liability insurance with limits of at least $[________] per occurrence and $[________] in the aggregate, naming Lessor as additional insured;
c. Workers' compensation as required by N.Y. Workers' Comp. Law; and
d. Certificates of insurance shall be delivered to Lessor before delivery and annually thereafter, with 30 days' notice of cancellation.

6. DISCLAIMER OF WARRANTIES

6.1 Pursuant to N.Y. U.C.C. § 2-A-214(2), LESSOR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY UNDER § 2-A-212, FITNESS FOR A PARTICULAR PURPOSE UNDER § 2-A-213, NON-INFRINGEMENT, OR THAT THE EQUIPMENT IS DEFECT-FREE OR FREE FROM CLAIMS OF THIRD PARTIES. THIS DISCLAIMER IS BINDING NOTWITHSTANDING ANY OTHER PROVISION OF THIS LEASE.

6.2 In the case of a finance lease, Lessee's sole remedy for breach of warranty is against the supplier under the supply contract assigned or made available under N.Y. U.C.C. §§ 2-A-209 and 2-A-211.

7. TITLE, TAXES, AND LIENS

7.1 Title. Title to the Equipment remains at all times with Lessor. Lessee shall not suffer any lien to attach to the Equipment, and shall affix, where practicable, Lessor's ownership labels.

7.2 Precautionary UCC Filing. Lessor may file a UCC-1 financing statement with the New York Department of State pursuant to N.Y. U.C.C. § 9-505 as a precautionary measure without prejudice to the true-lease characterization of this Lease.

7.3 Lessee shall keep the Equipment free of all liens, claims, and encumbrances, and shall defend Lessor's title at Lessee's expense.

8. DEFAULT AND REMEDIES

8.1 Events of Default. Each of the following constitutes an "Event of Default":
a. Lessee's failure to pay any Rent within [five (5)] Business Days after written notice of non-payment;
b. Lessee's material breach of any non-monetary covenant not cured within thirty (30) days after written notice;
c. Lessee's insolvency or general assignment for benefit of creditors; provided that a bankruptcy filing or appointment of a trustee, custodian, or receiver is not by itself an enforceable termination or default trigger to the extent prohibited by 11 U.S.C. § 365 or other applicable law;
d. Unauthorized sale, transfer, sublease, or encumbrance of the Equipment;
e. Lessee's material misrepresentation; or
f. Cross-default under any other agreement between Lessor and Lessee.

8.2 Lessor Remedies. Upon an Event of Default, Lessor may exercise, cumulatively and without notice except as required by statute:
a. Cancel the Lease under N.Y. U.C.C. § 2-A-523;
b. Repossess the Equipment peacefully under N.Y. U.C.C. § 2-A-525(2), or with judicial process (including replevin under CPLR Art. 71);
c. Dispose of the Equipment in a commercially reasonable manner under N.Y. U.C.C. § 2-A-527;
d. Recover damages under N.Y. U.C.C. §§ 2-A-528 or 2-A-529, including:

• Accrued and unpaid Rent;
• Present value (discounted at the rate of [____]%, not exceeding the lawful rate) of future Rent for the remainder of the term;
• Residual value of the Equipment;
• Incidental damages under § 2-A-530; less
• Present value of the market rent for the remainder of the term;
  e. Prejudgment Interest at 9% per annum under CPLR §§ 5001, 5004;
  f. Attorneys' Fees as provided in Section 8.4; and
  g. All other remedies available at law or in equity, including injunctive relief under CPLR § 6301.

8.3 Commercial Reasonableness. Any disposition shall be conducted in a commercially reasonable manner. N.Y. U.C.C. § 2-A-504 addresses liquidation of damages and does not create a disposition-notice period for an Article 2-A lease. If this transaction creates or includes a security interest and Article 9 applies, any disposition must comply with N.Y. U.C.C. §§ 9-610 and 9-611, including reasonable signed notification to the required recipients.

8.4 Attorneys' Fees. Lessee shall pay all reasonable attorneys' fees, collection costs, and expenses (including bankruptcy proceedings and appeals) incurred by Lessor in enforcing this Lease.

9. INDEMNIFICATION AND LIMITATION OF LIABILITY

9.1 Lessee Indemnification. Lessee shall indemnify, defend, and hold harmless Lessor, its affiliates, officers, directors, employees, and agents from any and all claims, damages, liabilities, losses, costs, and expenses (including reasonable attorneys' fees) arising from or relating to (i) the possession, use, operation, maintenance, or repair of the Equipment; (ii) any personal injury, death, or property damage caused by the Equipment; or (iii) any breach by Lessee of this Lease, except to the extent caused by Lessor's gross negligence or willful misconduct.

9.2 Limitation of Liability. EXCEPT FOR INDEMNIFICATION OBLIGATIONS, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES. Lessor's aggregate liability shall not exceed the total Rent actually received during the twelve (12) months preceding the claim.

10. RETURN OF EQUIPMENT

10.1 Upon expiration or earlier termination, Lessee shall, at its sole expense, return the Equipment to Lessor at [________________________________] in good operating condition (ordinary wear and tear excepted), together with all manuals, accessories, and maintenance records.

10.2 Failure to timely return the Equipment entitles Lessor to hold-over Rent at 150% of the then-prevailing rate until return is effected.

11. GOVERNING LAW, FORUM, AND JURY WAIVER

11.1 Governing Law. This Lease is governed by and construed in accordance with the substantive laws of the State of New York, including N.Y. U.C.C. Article 2-A, without regard to conflict-of-law principles, pursuant to N.Y. Gen. Oblig. Law § 5-1401.

11.2 Forum. Each party irrevocably submits to the exclusive jurisdiction of the Supreme Court of the State of New York, [________________________________] County, and the United States District Court for the [________________________________] District of New York, for any dispute arising under this Lease. The parties invoke N.Y. Gen. Oblig. Law § 5-1402 only for an action against a consenting foreign corporation or non-resident arising from a transaction of at least $1,000,000 that selects New York law under § 5-1401. Where the jurisdictional thresholds under 22 NYCRR § 202.70 are met, actions shall be filed in the Commercial Division.

11.3 Jury Waiver. EACH PARTY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATING TO THIS LEASE.

11.4 Statute of Limitations. Actions must be commenced within the four (4) year period under N.Y. U.C.C. § 2-A-506. The parties may reduce the period to not less than one year, but may not extend it.

12. GENERAL PROVISIONS

12.1 Entire Agreement. This Lease, together with Schedules and Exhibits, is the entire agreement and supersedes all prior or contemporaneous communications.

12.2 Amendment; Waiver. No amendment or waiver is effective unless in writing and signed by both parties.

12.3 Assignment. Lessee may not assign without Lessor's written consent. Lessor may assign or pledge the Lease and the Rent stream to any financing source, and Lessee acknowledges that any assignee shall have the rights of a "holder in due course" and shall not be subject to defenses Lessee may have against Lessor.

12.4 Notices. All notices shall be in writing and delivered by certified mail, overnight courier, or email with confirmation, to the addresses in the preamble.

12.5 Severability. Invalid provisions shall be reformed to the maximum extent enforceable.

12.6 Counterparts; Electronic Signatures. This Lease may be executed in counterparts. Signatures delivered electronically under N.Y. State Technology Law Art. III (ESRA) are deemed original.

12.7 Force Majeure. Neither party shall be liable for delay or failure beyond its reasonable control (Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900 (1987)); this does not excuse Lessee's Rent obligation under Section 4.2.

13. EXECUTION

IN WITNESS WHEREOF, the parties have executed this Equipment Lease Agreement as of the Effective Date.

EXHIBIT A — ACCEPTANCE CERTIFICATE

Lessee hereby certifies that: (a) the Equipment described in Schedule 1 has been delivered, installed, inspected, and fully accepted as of [__/__/____] (the "Commencement Date"); (b) the Equipment is in good operating condition and conforms to the Lease; and (c) all conditions precedent to Lessor's funding have been satisfied.

LESSEE: ___________________________ Date: [__/__/____]

SCHEDULE 1 — EQUIPMENT DESCRIPTION

SCHEDULE 2 — RENT SCHEDULE

SCHEDULE 3 — PERMITTED LIENS

[List permitted encumbrances, if any]

Sources and References

• N.Y. U.C.C. Article 2-A — https://www.nysenate.gov/legislation/laws/UCC/A2-A
• N.Y. U.C.C. § 2-A-407 (Hell or High Water)
• N.Y. U.C.C. § 9-505 (Precautionary Filings)
• N.Y. Tax Law § 1101(b)(5) (Receipts Definition)
• N.Y. Tax Law § 1115 (Exemptions)
• Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900 (1987)
• 22 NYCRR § 202.70 (Commercial Division)

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. It must be reviewed and customized by a New York-licensed attorney before use.