The issues of automatic renewals and lessor ethics generally are likely to become even hotter topics. In one recently Alabama case, a lessee signed a fair market value purchase option lease, thinking it provided for the $1 purchase option he negotiated with the leasing company. When the leasing company attempted to collect automatic renewal rents, the lessee cried "foul" and the court agreed. The basis for the court's decision was that, despite the FMV purchase option, the lease was actually a secured financing because the equipment had, and was expected to have, no remaining economic useful life at the end of the term. 

In other words, the court looked to the economic reality of the transaction rather than the parties stated intent and FMV purchase option. 

The accounting changes resulting from the demise of FASB 13 will encourage creativity and almost certainly reduce the number of true leases closed in coming years. 

Something, probably not something good, will result from the changes to California's finance lender law. The bigger issue is whether we will see other states introduce licensing regulation. 

We expect that the recent meteoric rise in working capital loans will result in some states taking a hard look at usury laws. 

As a general matter, it appears that lessees and their counsel are paying more attention to documentation and we anticipate certain "standard" provisions to be challenged. It may be time for lessors to know what alternatives they can offer without giving up too much. 

As more banks and traditional lending institutions become aware of the benefits equipment leasing and finance, we expect to see more loan-type transactions and changes in EFA and lease forms to add financial covenants and other traditional loan features. Unfortunately, this also means that some banks and other lenders will attempt to get into leasing and other equipment finance products without sufficient training and experience. 

One way or the other, we expect everyone is going to be busier (which is good), including ourselves and other lawyers (which may be a bad sign, generally). 

Here's wishing you and your families a healthy, happy new year. Your thoughts on these and other issues are always welcome!

            FMV (true lease). Actually, given the other answers it wouldn't make much difference. Unfortunately, a $1-out lease isn't much safer because judges don't always get the distinction and, even though liability for damage caused by equipment financed by a loan or EFA is remote, there are a couple of issues to consider.

            A welding unit. If the equipment is a phone system or computer, some lessors will forego liability coverage for obvious reasons. I asked what was included in a welding unit the guy's description of the unit involved a heat source, pump/motor and propane tank.