In non-recourse leasing, which documentation is most important?

• A. No documentation is needed.
• B. Documentation should focus on insurance certificates.
• C. Lease term length.
• D. Clear remedies and recourse provisions ensuring recourse is specified.

Answer: (D)

In non-recourse leasing, the lender’s or lessor’s ability to recover is limited to the collateral, so the contract must clearly spell out what happens when there’s a default. The most important documentation is the remedies and recourse provisions that define exactly what the lessor may claim, how remedies are exercised, and whether any exemptions or guarantors exist. Clear language about cure periods, acceleration, repossession, disposition of collateral, and any carve-outs (such as fraud or misrepresentation) protects the parties by removing ambiguity and guiding enforcement, especially in situations like bankruptcy or declining collateral value. This clarity is what makes recovery predictable and aligns expectations, which is why these provisions are the most critical.

Notes on other ideas: simply having insurance certificates addresses risk transfer, not enforcement of rights if defaults occur. Focusing on the lease term length manages planning details but doesn’t address who pays or what steps follow a default. And stating that no documentation is needed ignores the essential protections and procedures that govern non-recourse arrangements.