Protecting the Business Relationship

A final aspect of the lease-buy decision relates to the lessor-lessee relationship. If the lessor encounters financial difficulties, under certain circumstances the prospective lessee can be adversely affected. That is, depending upon the terms of the lease and the lessor's financing arrangements, a lender might look to the property to satisfy a default by the lessor. Although careful wording of the agreement can afford a measure of protection, it is essential that the lessee look into the prospective lessor's financial condition, business reputation, and client relationships. If the findings are favorable, negotiations may be carried out with a minimum of delay and expense. If the findings are unfavorable, the prospective lessee might still wish to proceed, relying on the protective clauses in the agreement, or he might abandon the lease (at least with that party) entirely.