Leasing 102

" Dispute Resolution"

by Mr. Terry Winders, CLP

Anyone who has gone to the legal courts today is aware of the cost, and most important, the time delays, to get resolution of a default or a dispute. One of the most common disputes is the definition of fair market value purchase options. For instance: What is the value of a snow blower in Minneapolis in January versus a snow blower in Miami? Easy question, but clearly different answers. Therefore just saying "fair market value" may get you into a dispute with your lessee. Their assumption of value may be different than yours and how to resolve the problem without losing the goodwill of your customer becomes the problem. Many lessors are turning to arbitration, instead of the courts, to settle their problems.

Language like this is showing up in modern lease agreements: "Any dispute between the parties hereto that is not resolved by informal negotiations shall be resolved by final and binding arbitration conducted by a single arbitrator appointed by the American Arbitration Association (the "AAA"). Such arbitration proceeding shall be governed by the Federal Arbitration Act and conducted in (City, State) in accordance with the Commercial Arbitration Rules of the AAA. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Such arbitrator shall have authority to award actual damages and reasonable attorneys' fees and other costs of arbitration to the prevailing party to such arbitration, but shall have no authority to award either party any penalties or any consequential, special, exemplary, or punitive damages"

This form of arbitration is quick and usually gets to the heart of the problem and settles it without either side taking offence. However some Lessor's prefer mediation because the process typically involves nonbinding discussions between the parties and an agreed-upon mediator. The issue here is weather the outcome is binding or nonbinding. An arbitration usually reports to the courts and is binding whereas a mediation is just between the management staff of the lessee and lessor and if they both live up to the agreement all is well, However, if either party gets cold feet the agreement may fall apart.

Both forms of resolution is preferred to the legal court system because of cost reduction and usually a faster decision.

Mr. Terry Winders has been a teacher, consultant, expert witness for the leasing industry for thirty years and can be reached at leaseconsulting@msn.com or 502-327-8666.

October 9 th and 10 th he is conducting a two day seminar in Louisville, Kentucky. To learn more, please go here:

http://leasingnews.org/PDF/Winders_Seminar.pdf