Catanese & Wells, A Law Corporation provides a quarterly newsletter to the equine industry of and concerning legal, tax and business issues for participants in the horse business or sport. www.cataneselaw.com (https://www.cataneselaw.com).
This issue of the Equine Legal Summary discusses issues that arise when an equine is leased by an owner to a third party. Topics include common issues to plan for and to avoid in a lease agreement.
Oftentimes a person may want to lease a horse or pony in order to try the equine before they make a larger commitment to actually buy the horse or pony. The owner of the equine – the lessor -is motivated to lease the animal as a means of additional income without giving up the animal especially if the equine is a valuable asset. The other person – the lessee – is motivated to lease the equine because they can use the animal in competition and otherwise without having to first pay a large sum to the buy the animal before they have any substantial time working with the equine. And, if the lessee is successful in competing with the animal, they know they have a fixed price to buy the equine if the value of the animal increases because of their efforts with the horse or pony.
Also, there are times when the owner of the horse wants to lower their cost of ownership and so they lease the horse to a third party who will take on the costs of care, maintenance, insurance, show fees, etc. In exchange, the lessee has the right to use the equine as agreed with the lessor.
Once the lessor and the lessee agree to a lease the question arises – how should the lease agreement be memorialized? In writing, orally or by a handshake?
It is highly advisable to use a written lease agreement when a lessor and a lessee desire to enter into an agreement for the lease of an equine. A written agreement will give clarity as to what the parties intended, whereas an oral agreement will be subject to interpretation and hard to enforce by a court of law. A written lease agreement should cover things like the term of the lease, insurance for the horse, notice to husbandry care providers for the subject equine, restrictions on use of the horse by the lessee, restrictions on transportation of the horse and what condition the horse is to be in at the time the horse is returned by the lessee to the lessor when the lease ends. The written lease should also contain a provision that the lessee and their veterinarian must contact the lessor for prior approval of any treatment of the horse like “maintenance” or any other type of invasive treatment by the veterinarian. In most cases, a clause addressing third party liability or property damage caused by the equine should also be included in the written lease agreement.
A couple of other issues are worthy of note – 1) if the lease provides for insurance be sure that there are provisions to ensure that the insurance is actually acquired and maintained by the lessee if they are to acquire and pay for the equine insurance and 2) when the lease is about to start and/or at the end of the lease be sure the equine is examined by a veterinarian almost in the nature of a pre-purchase examination (this will establish the baseline condition of the horse at the start of the lease and at the end of the lease).
With a well drafted equine lease agreement the lessor and the lessee should be able to achieve their respective goals and jointly benefit from the equine lease. An experienced equine lawyer can assist with a written lease agreement which will benefit both the lessor and the lessee by reducing any misunderstandings related to the equine lease.
For any questions related to the above, feel free to contact our offices at info@cataneselaw.com or 818/707-0407.