The simplest and most effective option when selling your business with leased or hire-purchase equipment is to pay out the balance before settlement. This gives you full ownership of the equipment, simplifies the sale process, and ensures the buyer receives the equipment without encumbrances.
If you cannot pay out, it is possible to ask the buyer to take over the agreements, but this only works if the leasing company agrees to an assignment/novation and the buyer is acceptable to the lessor. Some agreements cannot be transferred, and some buyers may not want the added complexity.
Leased or hire-purchase equipment affects ownership, buyer perception, and sale price. The following is a step-by-step guide for you to manage this correctly on your own.
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1. Identify all leased or hire-purchase equipment
Create a complete list of every item under lease or hire purchase, including:
- Equipment description (make/model, serial no.)
- Lessor / finance company contact details
- Contract/reference number
- Monthly payment amount and frequency
- Remaining term (months left)
- Current outstanding payout / settlement figure (request from the lessor)
- Whether the agreement allows assignment/novation (transfer) or return
- Any early termination or exit fees, penalties, or refurbishment charges on return
- Whether the item is registered on the PPSR (or similar security register)
Why this matters: Buyers (and their solicitors) will want accurate, verifiable figures to assess price and risk.
2. Understand ownership & transfer options
Leased equipment is not fully owned by you. Your options are:
A. Pay out the lease before settlement — Preferred
What to do: Request a written payout/settlement figure from the lessor, pay the amount, and get written confirmation that the lessor will discharge their security and release the asset. Ensure the PPSR registration (if any) is updated or discharged to show full ownership.
Pros
● Equipment becomes fully yours and can be sold free of encumbrance.
● Simplifies the sale process.
● Buyers see the equipment value clearly and are less likely to discount the price.
Cons
● Requires upfront cash or financing.
● May incur early termination or payout fees.
Tips
● Ask the lessor explicitly for a “settlement/payout figure including any fees” and a “discharge of security on receipt.”
● Keep paperwork showing clear ownership for the buyer.
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B. Ask the buyer to take over the lease (assignment/novation) — Only works if the lessor agrees
What this means: The buyer takes on the remaining lease payments and obligations, and the lessor issues a novation or assignment to release you from liability.
Pros
● No upfront payout required.
● Can make the sale more affordable for the buyer.
Cons / conditions
● Only works if the lessor approves and the lease allows assignment.
● Transfer may involve fees, changed terms, or the buyer providing security.
● Without written release from the lessor, you may remain liable if the buyer defaults.
Steps to follow:
1. Notify the lessor early and ask what is required to transfer (forms, fees, buyer credit checks).
2. Get the lessor’s conditions in writing.
3. Ensure the buyer signs any transfer documents and that you receive a release/novation from the lessor.
4. Update PPSR registration to show the new secured party or remove your liability.
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C. Return the equipment (if allowed under the contract)
What to do: Follow the contract terms for return, address refurbishment or wear-and-tear charges, and arrange logistics before settlement.
Pros
● Eliminates ongoing obligations.
● Avoids upfront payout.
Cons / conditions
● Only possible if your contract permits return at this stage.
● Returning equipment reduces the tangible assets and perceived value.
● Buyer may need replacement equipment.
● Fees or refurbishment charges may apply.
Tip: If returning critical equipment, include the impact in your disclosure schedule and adjust the price or replacement plans accordingly.
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3. Check PPSR (Personal Property Securities Register)
Many leases create a registered security interest. A clean sale requires resolving PPSR positions.
Steps for sellers:
1. Gather contract numbers and serial numbers.
2. Run a PPSR search (or ask your solicitor/accountant) for each item.
3. If you are listed as a grantor, obtain a discharge from the secured party on payout. For buyer transfers, ensure proper assignment/novation is recorded.
4. Keep screenshots or copies for the buyer.
Why: Buyers’ solicitors will check PPSR; unresolved registrations can delay settlement.
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4. Adjusting valuation when equipment is leased
Rule: If your P&L already includes lease payments, do not deduct them again. If not, deduct lease payments before applying a multiple.
Example:
● Net profit (before lease) = $60,000
● Lease payments = $12,000/year
● Adjusted net profit = $48,000
● Apply multiple (1.5) → $48,000 × 1.5 = $72,000 sale price
If the buyer takes on the lease, they will model the business using net profit after lease obligations. Show both versions (with and without lease payments) to avoid confusion.
Tip: Clearly label which figures include/exclude lease payments in your summary.
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5. Disclosure schedule — what to include
Provide a table listing all leased/hire items:
Item Make/Model/Serial Lessor Contract No. Monthly $ Remaining term Estimated payout (date) Transferable? (Y/N) PPSR registered? (Y/N) Return terms / fees Notes
Sample wording:
“The following equipment is subject to hire-purchase/lease agreements. The vendor will provide written settlement/payout figures and will either (a) settle amounts before completion, or (b) transfer the lease to the buyer with lessor consent. All items and PPSR registrations are disclosed.”
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6. Recommended process & timeline
1. Before marketing: compile equipment list, request payout figures/transfer conditions, run PPSR searches.
2. On listing: disclose equipment and lease status.
3. During negotiations: explain your preferred option (payout) and provide figures.
4. Prior to contract exchange: confirm which option will be used and get written lessor consent if the buyer assumes leases.
5. At settlement: provide discharge/novation documents and update PPSR.
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7. Common pitfalls
● Assuming leases are transferable: always get written confirmation from lessor.
● No written release: you remain liable if the buyer defaults.
● Unreported PPSR registrations: will cause delays.
● Hidden return/refurbishment fees: check contracts.
● Double-counting lease costs in valuation: verify P&L treatment.
● Buyer credit check delays: plan ahead if buyer takes over leases.
● Tax/GST implications: consult your accountant.
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8. Who to involve
● Lessor/finance company: for payout/transfer instructions.
● Accountant: for valuation and tax/GST advice.
● Solicitor: for contract wording, novation, and PPSR discharge.
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9. Quick checklist for sellers
● Create full equipment list with serial numbers and contracts.
● Request written payout figures and transfer/return conditions.
● Run PPSR searches and save results.
● Decide preferred option (payout preferred) and document in disclosure.
● Share disclosure schedule and payout figures with buyers.
● If buyer takeover, get written lessor requirements and buyer consent.
● Ensure discharge/novation and PPSR update at settlement.
● Get legal and accounting advice for contracts and tax issues.
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Final note:
Paying out leases before settlement is the cleanest, simplest option. If you cannot, be prepared with written lessor consent, a detailed disclosure schedule, and solicitor-drafted novation/release documents to protect yourself.
Find more details about our Six Steps Program here:
https://www.thesixstepstosale.com.au/
About Christina Jones
Six Steps to Sale Program Manager Australia Wide
0493 266 451
c.jones@gsebrokers.com.au
I doubled profits in two years while reducing our work days from 7 days a week to 5 days and closing all public holidays.
The combination of Hospitality and Real Estate experience as well as working in large corporate organisations, has enabled me to truly understand the importance of having processes, systems and great customer service and a strong team. I also believe that if you are in business you should never stop learning.
I am incredibly passionate about providing customer service experience and helping others succeed, and I look forward to helping you on your hospitality journey, whatever that may be.
