By Julie I. Fershtman
In this difficult economy, we often hear about people being forced to sell off their horses because they can no longer afford to keep them. In addition, many horse owners, rather than selling, are leasing out their horses in order to retain ownership and await improved economic conditions in the future when they can use the horse.
Lease arrangements, even among friends, can sometimes turn sour when problems and misunderstandings occur. But lease contracts, especially when well-worded, can help avoid disputes. This article discusses common problems in equine lease arrangements that can be avoided by a well-written contract. Keep in mind that the “lessor” is the one who owns the horse and is parting with it temporarily under the terms of the arrangement. The “lessee” is the one allowed to use the horse under lease arrangement.
The Horse Injures Somebody During the Lease Arrangement
The most disastrous economic consequence that could come from a lease arrangement is that the leased horse injures or kills somebody while the arrangement is in effect. Equine activity liability laws, now found in 46 states, do not always provide the protection you might expect against certain types of lawsuits.
For the protection of the lessor, the well-written lease agreement can include a waiver or release of liability (where allowed by law) and an indemnification agreement. Most states have shown a willingness to enforce these documents, but states can differ widely in their language requirements. My books and articles have discussed these documents in detail and elements that can make them more effective. For the best protection, have your document drafted or reviewed by a knowledgeable lawyer.
A detailed lease can also address liability insurance. It can state the minimum amount of liability insurance coverage that must be in effect during the lease term and specify exactly whom the insurance will protect in the event that a claim is made by an injured person.
The Lessee’s Misuse of the Horse
Over the years, problems have occurred when lessees use the horse in a manner that the lessor disapproved. Disputes have arisen, for example, when the lessee has bred a mare, causing her to foal out during a time when the lessor wanted to prepare the mare for competition. I have also heard of lessees breeding the mare but failing to give adequate pre-natal and post-natal veterinary attention, which jeopardizes the mare’s health during and after the lease arrangement.
The well-documented lease contract can specify permitted and non-permitted uses and clarify when the horse can be used for certain activities. To allow some degree of flexibility, the document can also allow the lessor and lessee to change the use as long as they have agreed in writing.
Return of the Leased Horse
Years ago I learned of a lawsuit that occurred when the lessee refused to return the horse to the lessor. With nothing in writing, the lessee argued that he had purchased the horse, not leased it. The lessor insisted that the small amount of money he received from the lessee was merely a lease payment, not a purchase price. After a costly trial, the lessor won the case, but the dispute could have been avoided completely by a contract.
Abuse of the Leased Horse
Lessors and lessees sometimes disagree over the quality of care and attention that the leased horse should receive. As an example, if the horse is a high-caliber show horse, the contract can specify the standard of care and generally state that the lessee must consistently give the horse the quality of care, feed, handling, attention, and stabling customarily given to horses of this caliber. Other contracts, in an effort to accomplish this with greater detail, can specify that the leased horse must receive regular attention by a specified veterinarian and farrier and that the horse must at all times be boarded and trained at a specified stable.
Injuries and Illnesses
It is always foreseeable that the leased horse can become injured, ill, or even die, during the lease term. A well-written lease agreement can address who pays the veterinary expenses, now and in the future, if the horse becomes injured, lame, or ill. The agreement can also address whether the leased horse must be insured through a policy of mortality, loss of use, and/or major medical insurance. (Keep in mind that lessees rarely, if ever, have an insurable interest in a leased horse for the simple fact that lessees do not own horse. On the other hand, an insurer might be willing to offer some protection to the lessee that is equal to the amount of the lease payment he or she made.) Discuss insurance with a knowledgeable insurance agent.
This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.
About the Author: A lawyer for nearly 24 years, Julie Fershtman is one of the nation’s most experienced Equine Law practitioners. For more information, visit www.equinelaw.net or www.equinelaw.info. Julie’s books, MORE Equine Law & Horse Sense and Equine Law & Horse Sense can be found in the CHA shopping cart online at www.CHA-ahse.org or by calling CHA at 800-399-0138.