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What is Equipment Leasing?
Equipment leasing is a common financing arrangement where one party (the lessor) provides equipment to another (the lessee) for use over a defined term in exchange for periodic payments. It allows businesses to acquire essential machinery, vehicles, IT infrastructure, or other operational tools without the upfront capital investment required to purchase them outright. Leases may be true leases or structured as finance leases, depending on whether the arrangement resembles a rental or a purchase over time.
In Ontario, equipment leases are governed by contract law and, where applicable, the Personal Property Security Act (PPSA). Leases may appear straightforward, but they are often long-term financial commitments with embedded risks, especially when high-value or business-critical equipment is involved. Whether you’re leasing as a lessor or a lessee, proper legal advice ensures your interests are protected throughout the life of the agreement.
Why Legal Review is Critical in Equipment Leasing
While many leasing companies use standard forms, these contracts are often heavily tilted in favour of the lessor. They may contain clauses that expose the lessee to hidden costs, excessive penalties, personal guarantees, or liability for maintenance, damage, or downtime—even if the failure is not their fault. On the other hand, lessors may expose themselves to risk by using vague language, failing to register properly under the PPSA, or relying on outdated templates.
Involving a business lawyer early in the process ensures that:
Lease terms are clearly defined and commercially reasonable
Termination and default clauses are balanced and enforceable
Risk for maintenance, insurance, loss, or damage is properly allocated
Ownership and title to the equipment is clearly established
Personal guarantees, security interests, and indemnities are carefully reviewed
All documentation aligns with financing or tax planning objectives
Legal review is especially important when leases involve high-value equipment, long terms, or complex financing arrangements. Whether you are the lessee or the lessor, our firm can draft, review, or negotiate the lease to protect your interests and minimize future disputes.
General Security Agreements (GSAs) and the PPSA
Many equipment leasing arrangements involve the use of a General Security Agreement (GSA) or specific security agreements to secure the lessor’s interest in the leased equipment or other assets. A GSA allows the lender or lessor to register a security interest under Ontario’s Personal Property Security Act (PPSA). This registration ensures that the lender’s or lessor’s interest in the equipment is publicly recorded and takes priority over other creditors or claimants.
Failing to properly register a security interest can lead to significant legal consequences. For example, if the lessee becomes insolvent or sells the equipment, the unregistered interest may be lost. A properly registered PPSA filing protects the lessor’s ownership or security rights and may deter third parties from interfering with the leased property.
We assist clients with:
Drafting and reviewing GSAs and specific security agreements
Preparing and registering PPSA financing statements
Verifying the priority of secured interests in multi-creditor transactions
Ensuring compliance with renewal, discharge, and amendment obligations under the PPSA
Understanding and navigating the PPSA is critical in any leasing or secured transaction. Our firm ensures that all registrations are completed accurately and that your security interests are enforceable.
Additional Legal Considerations in Equipment Leasing
Tax and Accounting Treatment: The structure of a lease can impact how it’s treated for tax and accounting purposes. True leases may allow lessees to deduct lease payments as expenses, while finance leases may be considered asset acquisitions. We work with your accountant or tax advisor to ensure the legal documentation aligns with your financial planning.
End-of-Term Obligations: Many lease agreements contain complex provisions at the end of the term—such as automatic renewals, buyout options, return conditions, and repair requirements. These clauses should be carefully negotiated to avoid surprises at the end of the lease.
Cross-Provincial or Cross-Border Leasing: If equipment is leased across jurisdictions (e.g., from Ontario to the U.S. or vice versa), additional legal considerations apply. These may include conflict of law rules, tax treatment, and foreign PPSA-equivalent registration requirements. We advise clients on how to structure and document such arrangements properly.
Subleasing and Assignment: If you are a lessee who plans to sublease or assign the equipment or lease obligations to another party, your lease must allow for this flexibility. We help ensure that the contract includes clear rights—or that amendments are negotiated to accommodate your business plans.
How Jahanshahi Law Firm Can Help
At Jahanshahi Law Firm, we provide practical legal guidance to businesses involved in equipment leasing transactions—whether you’re acquiring essential operational equipment, leasing out business assets, or financing high-value tools. We assist both lessors and lessees with drafting, reviewing, and negotiating lease agreements, GSAs, and PPSA filings, ensuring that the documentation is enforceable, compliant, and aligned with your commercial objectives.
We also work closely with lenders, manufacturers, and business owners to structure leasing arrangements as part of broader financing or corporate reorganizations. Our focus is on managing legal risk, preserving operational flexibility, and protecting ownership rights.
Whether you are negotiating your first lease or managing a portfolio of equipment across jurisdictions, we can help ensure that your interests are protected and that your leasing arrangements support your business’s long-term strategy.
Contact Jahanshahi Law Firm today to learn more about how our equipment leasing legal services can benefit your business. Let us help you make informed decisions that support your business’s operational and financial objectives.