Appendix E :Lease Termination / Early Termination

E.1 Introduction

‘Lease Termination’ in OFSLL indicates the 'Return of Leased Asset' in which a Lease Account is allowed to be terminated either before or after the Lease Maturity Date. Early Termination indicates terminating a lease account before its maturity date.

In a lease termination, the account is either Charged-Off or Paid-Off clearing all outstanding dues and deriving the net Gain or Loss in specific buyout scenario as indicated below.

This section consists of the following:

• Types of Lease Termination
• Lease Termination Workflow
• Processing Lease Termination
• Summary of Lease Termination Transactions Posted
• Changes Post Lease Termination

E.2 Types of Lease Termination

During lease termination, the leased asset can be returned or purchased by paying the residual amount. Accordingly, lease Termination can be posted in either of the following ways:

Type	Action
Termination with buyout	Here, the input 'Sale Price' of asset is compared with 'Outstanding Bills + Book Residual Value' of asset to derive Gain / Loss.
Termination without buyout	Here, Outstanding Bills + Book Residual Value is posted to 'Inventory'.

Note

During either of the termination types, the inventory balance is not accounted in total of the balances populated in Customer Service > Transaction History > Balances > Current Bal­ance tab. The entry is posted as Current Balance Total (Excluding Inventory).

E.3 Lease Termination Workflow

This workflow of lease termination is detailed below and is broadly explained in three stages:

• Contract stage defining how the lease contract is terminated.
• Processing stage defining how the request is processed with internal validations.
• Final stage defining how lease account is terminated handling outstanding balances.

  

In the first stage:

• The lease contract termination is triggered by defining how termination is to be processed using the standard system parameters. (For example, defining on how to include residual value of the asset in case of termination with buyout).
• In case of Early Termination, system verifies the 'Early Termination' parameters defined in the contract before processing the termination.

Note

At the time of contract creation user can indicate the preference of 'Asset Purchase' and instruct to include 'Residual Value' (Either Book Value or Market value) in final statement automatically. However, this amount is included only in account statement and not includ­ed in the bill.

In the second stage:

• On receiving the lease termination request, system validates the type of request and performs pre-defined checks which consists of the qualifying criteria.
• For a termination without asset buyout, termination charges are derived by adding all the outstanding balance excluding unbilled amount + residual value and is posted to inventory balance.
• For a termination with asset buyout, along with deriving termination charges system also calculates the sale price by accounting the residual value of asset. This also indicates Gain or Loss during the lease termination process.
• During the above process a set of transactions are internally posted by the system. The same are detailed in ‘Summary of Lease Termination Transactions Posted’ section.

In the third stage:

• The lease account is closed by either posting Charged-Off or Paid-Off transaction upon validating the outstanding balance.

E.4 Processing Lease Termination

On posting ‘Lease termination transaction’ either before or after maturity date, following actions are performed by the system on the lease account:

1. ‘Amount Due’ is tracked separately after termination also and independent of termination transaction.
2. In 'Due Date History', the Payment Received flag is updated to Y (Irrespective payment received or not).
3. Rent/ Interest continues to accrue after posting of termination for 'Interest Bearing Lease'.
4. Statement generation is stopped after termination.
5. 'Payoff Quote' posting is not supported after account is terminated.
6. 'Current Balances' on account is moved to 'Terminate' Balances. While moving the balances, system 'Terminates' all individual balances and any outstanding dues (Lease Receivables, Rent, Fee and so on) would be tracked against the consolidated balance called 'Termination Balance'.
7. While posting termination transaction, system allows to post any fee (considering the Asset wear and tear) and the same is tracked as separate balance(s) under 'Terminate' bucket (Radio button).

For example, on posting a fee (Early Termination Fee of 120$) while posting termination, on effective termination the balances radio button will have 'Termination balance' and 'Early Termination' Fee balance as outstanding payable.

E.5 Summary of Lease Termination Transactions Posted

Following are the actions performed in systems during lease Termination against the specific Lease Type:

Actions in systems during lease Termination against the specific Lease Type	Rent Factor – without Buyout	Rent Factor – with Buyout	Interest Rate – without Buyout	Interest Rate – with Buyout	Comment
Early Termination (Before Maturity Date)	Rent rebate posted – If appli­cable	Rent rebate posted – If appli­cable	‘Interest Accrual’ transac­tion is posted	‘Interest Accrual’ transac­tion is posted
Normal Termination (Post Maturity Date)	--	--	‘Interest Accrual’ transac­tion is posted	‘Interest Accrual’ transac­tion is posted	User may have to post pay­ment transac­tion multi­ple times; as ‘Inter­est accrual’ happens after ter­mination and no payoff quote is available to post exact pay­ment. Residual value is included in final statement.
Due Date History	Pay­ment Received flag is updated to Y (Irre­spective of pay­ment received or not)	Pay­ment Received flag is updated to Y (Irre­spective of pay­ment received or not)	Pay­ment Received flag is updated to Y (Irre­spective of pay­ment received or not)	Pay­ment Received flag is updated to Y (Irre­spective of pay­ment received or not)	If Termi­nation reversed, this flag reinstates to normal.
Balances (If Termination posted)	‘Current Bal­ances’ on account would be moved to ‘Ter­minate’ Bal­ances. While moving the bal­ances, system ‘Termi­nates’ all individ­ual bal­ances and any out­stand­ing dues (Lease Receiva­bles, Rent, Fee etc) would be tracked against the con­soli­dated balance called ‘Termi­nation Bal­ance’.	‘Current Bal­ances’ on account would be moved to ‘Ter­minate’ Bal­ances. While moving the bal­ances, system ‘Termi­nates’ all individ­ual bal­ances and any out­standing dues (Lease Receiva­bles, Rent, Fee etc) would be tracked against the con­soli­dated balance called ‘Termi­nation Bal­ance’.	‘Current Bal­ances’ on account would be moved to ‘Termi­nate’ Bal­ances. While moving the bal­ances, system ‘Termi­nates’ all individ­ual bal­ances and any outstand­ing dues (Lease Receiva­bles, Rent, Fee etc) would be tracked against the con­soli­dated balance called ‘Termina­tion Bal­ance’.	‘Current Bal­ances’ on account would be moved to ‘Termi­nate’ Bal­ances. While moving the bal­ances, system ‘Termi­nates’ all individ­ual bal­ances and any outstand­ing dues (Lease Receiva­bles, Rent, Fee etc) would be tracked against the con­soli­dated balance called ‘Termina­tion Bal­ance’.
Transactions	All bal­ances are ter­minated (negated) and specifi­cally ‘Inven­tory’ transac­tion is posted on account. Inven­tory = Unbilled Amt + Resid­ual Value	All bal­ances are ter­minated (negated) and Specifi­cally fol­lowing txns posted: Gain /Loss of Asset Termi­nate Depreci­ation Termi­nate Residual Termi­nate Interest Accrued Termi­nate Fee Receiva­ble Termi­nate Tax Termi­nate Lease Receiva­bles Gain / Loss on Asset = Sale Price - (Unbilled Amt + Resid­ual Value)	All bal­ances are ter­minated (negated) and specifi­cally ‘Inven­tory’ transac­tion is posted on account. Inven­tory = Unbilled Amt + Residual Value	All bal­ances are ter­minated (negated) and Specifi­cally fol­lowing txns posted: Gain /Loss of Asset Termi­nate Depreci­ation Termi­nate Residual Gain / Loss on Asset = Sale Price - (Unbilled Amt + Residual Value)	Gain / Loss and Inventory informa­tion is shown as ‘Termina­tion Txn’à Result. These are shown under ‘Transac­tion His­tory’ and not shown under Bal­ances.
Balances à Current Bal­ance	Inven­tory bal­ance is not accounted in total of bal­ances in Lease à Cus­tomer Service à Transac­tion His­tory à Bal­ances à Cur­rent Bal­ance. (Label also read as Current Balance Total (Exclud­ing Inven­tory))		Inven­tory bal­ance is not accounted in total of bal­ances in Lease à Cus­tomer Service à Transac­tion His­tory à Bal­ances à Cur­rent Bal­ance. (Label also read as Cur­rent Bal­ance Total (Exclud­ing Inven­tory))
Payoff Quote	Not gen­erated after ter­mination	Not gen­erated after ter­mination	Not gen­erated after ter­mination	Not gen­erated after ter­mination
Statement	Not gen­erated after ter­mination	Not gen­erated after ter­mination	Not gen­erated after ter­mination	Not gen­erated after ter­mination
Paid off (after termination)	Pay amount in full and any excess amount can be refunded	Pay amount in full and any excess amount can be refunded	Pay amount in full and any excess amount can be refunded	Pay amount in full and any excess amount can be refunded
Charge off (after termination)	Only allowed to post after ter­mination All bal­ances would be moved to ‘Defi­ciency’ bucket. Any pay­ment after ‘charge off’ would show under ‘Recov­ery’ bucket. Account will be closed after cer­tain no. of days (based on sys­tem parame­ter)	Only allowed to post after ter­mination All bal­ances would be moved to ‘Defi­ciency’ bucket. Any pay­ment after ‘charge off’ would show under ‘Recov­ery’ bucket. Account will be closed after cer­tain no. of days (based on sys­tem parame­ter)	Only allowed to post after ter­mination All bal­ances would be moved to ‘Defi­ciency’ bucket. Any pay­ment after ‘charge off’ would show under ‘Recov­ery’ bucket. Account will be closed after cer­tain no. of days (based on sys­tem parame­ter)	Only allowed to post after ter­mination All bal­ances would be moved to ‘Defi­ciency’ bucket. Any pay­ment after ‘charge off’ would show under ‘Recov­ery’ bucket. Account will be closed after cer­tain no. of days (based on sys­tem parame­ter)
Restriction on transactions after posting termination (System doesn’t allow to post these transactions, once termination is posted)	Mone­tary txns: LEASE CHANGE PAY­MENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTEN­SION EVER­GREEN LEASE Non-mone­tary txn: ACCOUNT CON­TRACT MAIN­TEN­ANCE ACCOUNT PAY­MENT MODE MAIN­TAIN­ANCE STATE­MENT PREF­ERENCE MODE ADD NEW ASSET and	Mone­tary txns: LEASE CHANGE PAY­MENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTEN­SION EVER­GREEN LEASE Non-mone­tary txn: ACCOUNT CON­TRACT MAIN­TEN­ANCE ACCOUNT PAY­MENT MODE MAIN­TAIN­ANCE STATE­MENT PREF­ERENCE MODE ADD NEW ASSET and	Mone­tary txns: LEASE CHANGE PAY­MENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTEN­SION EVER­GREEN LEASE Non-mone­tary txn: ACCOUNT CON­TRACT MAINTE­NANCE ACCOUNT PAY­MENT MODE MAIN­TAIN­ANCE STATE­MENT PREF­ERENCE MODE ADD NEW ASSET and	Mone­tary txns: LEASE CHANGE PAY­MENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTEN­SION EVER­GREEN LEASE Non-mone­tary txn: ACCOUNT CON­TRACT MAINTE­NANCE ACCOUNT PAY­MENT MODE MAIN­TAIN­ANCE STATE­MENT PREF­ERENCE MODE ADD NEW ASSET and
	ACCOUNT EVENT NOTIFI­CATION (Involun­tary repos­ses­sion)"	ACCOUNT EVENT NOTIFI­CATION (Involun­tary repos­ses­sion)"	ACCOUNT EVENT NOTIFI­CATION (Involun­tary repos­session)"	ACCOUNT EVENT NOTIFI­CATION (Involun­tary repos­session)"

E.6 Changes Post Lease Termination

E.6.1 Lease Termination - Pay-off Quote transaction

On posting pay-off quote the residual amount is considered as a separate line item and not tracked as part of any due / Pay-off amount.

E.6.2 Lease Termination - Monetary Transaction

The result section in Customer Service > Maintenance > Terminate Monetary Transaction indicates the GAIN or LOSS of asset and value derivation.

E.6.3 Lease Termination - Balances tab changes

Selecting ‘Terminate Balance’ option in Customer Service > Transaction History > Balances indicates the Fee captured during termination transaction and Outstanding Due Amount payable (which is the (net Bill Amount - Amount Paid) + Interest Accrued as on termination date).

E.6.4 Lease Termination - Transaction History tab changes

The Transaction History table in Customer Service > Transaction History tab indicates the Gain or Loss arising out of termination with asset buyout calculated as Sale Price - (Unbilled Amount + Residual Value). System also posts the ‘Interest Accrued’ transaction indicating the accrued interest as on date of termination. This amount is used to post payment.

E.6.5 Lease Termination - Summary changes

In Customer Service > Summary screen > Delinquency Information section, the total outstanding amount is cleared.

E.6.6 Lease Termination - Due Date History changes

In Customer Service > Transaction History > Due Date History tab, after posting the termination transaction, all the ‘Pmt Received’ based on Days Past Due is set to ‘Y’.

E.6.7 Lease Termination - Paid Off Transaction changes

For Lease termination with buyout where there are no outstanding dues, the Paid off transaction is posted from Customer Service > Maintenance screen and is updated into the Payment Maintenance screen.

E.6.8 Lease Termination - Charged Off Transaction changes

For Lease termination with buyout where there are outstanding dues, the Charged off transaction is posted from Customer Service > Maintenance screen and the Balances in Transaction History is updated. The account is marked as CHARGED OFF.