Chapter Seven: Lease Purchases
Lease purchase agreements are usually for an extended period whereby the county will acquire title to said property upon final payment.
The approved form for lease purchase agreements is SA&I Form No. 120B, Lease Purchase Agreement, and has the following characteristics:
- Allows for renewal options
- Allows for ownership upon final payment
- Vendors must retain the title until the final payment is made
- Financing as provided by the vendor may not exceed 10% simple interest on the unpaid balance due as of each payment date
- Allows for termination of the lease if the lessee determines that sufficient funds have not been appropriated to make the payments required under the terms of the agreement
The Lease Agreement for Equipment and Lease Purchase Agreement approved forms as outlined above are designed to be full warranty agreements:
“…a warranty as to full performance generally covering both labor and materials. Under a full warranty, the warrantor (vendor) must remedy the product within a reasonable time and without charge….”
Refer to Table 7-1 for understanding the county’s authority to lease purchase.
| Legal Provision | What It Says | Comments |
|---|---|---|
| Oklahoma Constitution Article 10 § 26 | Counties are prohibited from incurring debt without the consent of the voters. | This factor prevents the county from signing a promissory note with a local bank, which would result in the county holding title to the equipment and the bank holding a lien against the equipment. |
| 62 O. S. § 430.1 | Counties may enter into a lease or lease purchase agreements under certain circumstances. | The vendor provides financing, but they may assign the lease payment to a financial institution. The vendor (or assignee) retains title to the equipment until the final payment is made by the county. |
| No indebtedness shall be incurred. | The contract is renewable yearly because the county may not obligate funds extending beyond the current appropriations (the current fiscal year). The Oklahoma State Auditor and Inspector prescribes SA&I Form No. 120B for lease purchases and SA&I Form No. 120-A for full warranty leases. These forms were written with help from the Attorney General's office to ensure compliance with the relevant statutory provisions. A recommended best practice is to have any alteration or addition made to SA&I Form No. 120B reviewed and approved by the county’s district attorney. | |
| 19 O.S. § 1501 | Requires rentals, leases, or lease purchases in excess of Twenty- Five Thousand Dollars ($25,000.00) to be let by sealed bid. | - |
| 19 O.S. § 3 | County's powers are exercised by the board of county commissioners. | Contracts must be approved by the board of county commissioners. |
| 47 O.S. § 1139.1 | Exemption from excise tax. | Allows the county to obtain a tag for a lease purchased vehicle. |