What should the lease expressly specify about ownership of the equipment?

• A. It is part of the real estate.
• B. It is personal property and not part of any real estate; the lessee agrees it is personal property and is solely the property of the lessor.
• C. Ownership transfers to the lessee upon signing.
• D. The ownership is undecided.

Answer: (B)

Ownership in a lease must be crystal clear to prevent disputes about title, liability, and tax treatment. The right approach is to specify that the equipment is personal property, not part of real estate, and that it remains the property of the lessor, with the lessee acknowledging it is personal property and not the property of the lessee. This keeps ownership with the owner and uses the equipment under the lease without transferring title, which is important for insurance, risk of loss, and potential end-of-lease options. If ownership were said to transfer upon signing, the arrangement would effectively become a sale rather than a lease. If it were described as part of real estate, the equipment would be treated as real property, which is typically not correct for movable equipment. Leaving ownership undecided creates ambiguity and potential disputes.