Protecting Lease Rights In Asset Protection Plan

I’ve noticed that asset protection clients often forget to consider the protection of leases. People typically do not think of a lease as an asset because the lease represents a monthly payment and a large liability. Yet, a lease is also an asset because it gives your right to use or occupy property so long as you make payments. A good lease can be quite valuable. For example, let’s say you have leased a new Mercedes for $200 a month for four years. That lease is an asset because your right to drive the Mercedes for the next four years for only $200 is a valuable right. If the lease payment were $1,000 per month then the lease would have no inherent value for most people.

Property leases are valuable regardless of the amount if the leased premises is used for your business. Your right to occupy the business property, and your leasehold improvements, are valuable because the lease is required to operate the business. An astute creditor will levy upon a property lease in order to close the doors to the debtor’s business. Even though the creditor would have to make future lease payments, the attack upon the debtor’s leases pressures the debtor to pay.

Lease valuation is also important when a debtor wants to sell or transfer business assets to another business or another business owner. The value of existing business leases must be determined by appraisal and then included in the transfer price in order to defend the fair value of the business asset sale.

You can protect leases as part of an overall asset protection plan, but you must understand the economic value of leases and discuss the leases with your asset protection attorney.