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The term gross capitalized cost refers to the total value of a leased property as agreed upon by both the lessor (the party leasing the property) and the lessee (the party renting the property). This cost includes not only the base value of the property but also any additional expenses that are capitalized or amortized over the lease duration. Such expenses may include taxes, insurance, service agreements, and any remaining balances from previous leases or credits. The adjusted capitalized cost is calculated by subtracting any capitalized cost reductions, such as rebates or cash payments, from the gross capitalized cost. This adjusted amount is what the lessor uses to determine the base periodic payment for the lease.
Table of content
Legal Use & context
Gross capitalized cost is primarily used in the context of consumer leasing agreements, particularly in the automotive and real estate sectors. It is significant in various legal areas, including:
Consumer credit protection
Contract law
Real estate leasing
Automotive leasing
Users can manage leasing agreements by utilizing legal templates available through resources like US Legal Forms, which provide professionally drafted documents to assist in these transactions.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A person leases a car with a gross capitalized cost of $30,000. They receive a rebate of $3,000, which reduces the gross capitalized cost to $27,000. The lessor will use this adjusted amount to calculate the monthly lease payments.
Example 2: A business leases office space with a gross capitalized cost of $50,000, which includes taxes and insurance. After applying a capitalized cost reduction of $5,000, the adjusted capitalized cost is $45,000, impacting the lease payment structure. (hypothetical example)
Relevant laws & statutes
Gross capitalized cost is defined under the 15 USCS Appx 12 CFR § 213.2, which is part of the Consumer Leasing Act. This regulation outlines the requirements for disclosures in consumer leases and the calculation of lease payments.
State-by-state differences
Examples of state differences (not exhaustive):
State
Variation
California
Specific rules on disclosure of gross capitalized cost in lease agreements.
New York
Additional consumer protections and regulations regarding leasing practices.
Texas
Different requirements for calculating adjusted capitalized costs in vehicle leases.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Adjusted Capitalized Cost
The gross capitalized cost minus any reductions.
This is a subset of gross capitalized cost used for payment calculations.
Capitalized Cost Reduction
Reductions applied to the gross capitalized cost.
This term specifically refers to the financial adjustments that lower the gross capitalized cost.
Common misunderstandings
What to do if this term applies to you
If you are entering into a lease agreement, it is essential to understand the gross capitalized cost and how it affects your payments. Consider the following steps:
Review the lease agreement carefully to identify the gross capitalized cost and any reductions.
Use legal templates from US Legal Forms to draft or review your lease documents.
If you have questions or concerns, consider consulting a legal professional for tailored advice.
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