It is a very convenient administrative document so that once agreed, legal terms and conditions never need to be negotiated again. Municipal Lease Same as a capital lease except that the lessee is a public entity. Although the product and features are identical, the legal documentation is different because of the unique status of public entities. Any lease where all costs in connection with the use of the leased property are paid by the lessee and are not part of the periodic lease payments. For instance, maintenance, insurance and taxes are paid directly by the lessee.
Capital leases are generally net leases.
Operating Lease Another accounting classification for a lease. A lease that does not meet the criteria for a capital lease is an operating lease. With an operating lease, the lessor is generally taking a risk that at the end of the term the lessee will either purchase the leased property, renew the lease, or the leasing company can remarket the leased property for its residual value. The guarantee of someone to be individually responsible for the obligations under the lease. Generally for Subchapter S closely held companies and small businesses, a leasing company may ask for a personal guaranty as a way to insure that the lease payments will be made.