CONTRACTS. The average fleet manager has a pile of them on his or her desk, each containing reams of paper and masses of small print.
Can you reasonably be expected to remember all the terms and conditions?
Do you regularly cross-reference your operations with them? The consequences of inadvertently violating some of these conditions – known as an event of default – can be severe.
And yet it can take something as innocuous as a driver taking his company car on holiday to start alarm bells ringing.
In the latest serialisation of Colin Tourick’s fleet management bible Managing Your Company Cars, we take a look at the typical events of default found in a standard lease contract, and talk to leasing companies about other dangers.
USUALLY your contract will set out what will happen if you are in default.
This will normally include allowing the leasing firm to repossess the vehicle, to enter your premises to do so if necessary and to charge interest on late payment at a default rate.
If you default, there is likely to be a termination sum payable to the leasing firm to make sure the company can clear its books and make a profit. This is likely to include:
Cost of repossession, including court and legal costs.
All rental arrears.
Any other amounts due to be paid to the date of termination.
All future rentals that would have been payable had the lease continued to the normal end date, possibly subject to a discount for early payment.
List of leasing misdemeanours can be a long one
IF you carry out – or fail to carry out – certain obligations or actions set out in an agreement, you will be deemed to be ‘in default’ of your obligations.
The list of ‘events of default’ can be long. Typically, it will include:
If you fail to pay rentals or other amounts due or within a fixed period of the due date.
If you fail to insure the vehicle comprehensively.
If there is a material change in your circumstances that is likely to be disadvantageous to the leasing firm, in their reasonable opinion.
If you attempt to sell, charge, pledge or mortgage the vehicle.
If you remove it from the United Kingdom without the leasing firm’s written consent.
If you breach any term of the agreement that is capable of being remedied, then fail to remedy the breach within a certain period.
If you enter into any agreement with your creditors for the satisfaction of your debts under insolvency legislation.
If you wind up, or attempt to wind up, your business.
If you fail to meet your obligations under a finance agreement.
If any distress is executed by a third party (such as assets being taken for non-payment of tax or VAT).
If you cease or threaten to cease carrying out business.
If you transfer or dispose of a substantial part of your assets.
If you admit you are unable to meet your debts as they fall due.