Overview: Equipment or Real Estate Leases

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What Is a Lease Agreement?

A lease agreement (sometimes referred to as a "rental agreement") is established when Stanford funds are used to rent, borrow, or use an asset that meet the two key elements below for a specific period of time greater than one month. Please refer to Administrative Guide Policies 5.2.2: Equipment Leases and 5.2.5: Real Estate Leases, for guidance on approval requirements.

There are two key elements in a lease that establish that one party is leasing an asset to another party:

  1. An Identified Asset – The asset could be equipment, such as a medical device, a vehicle or a copier; or real estate, such as a building or a portion of a building.
  2. A Right to Control Use of the Identified Asset – The lessor transfers control of the identified asset they own to another party, called a lessee, for a period of time in exchange for a payment or consideration. The time period is known as the lease term, which has a commencement date and a termination date.

Note:  The following do not qualify as leases:

  • Leases for one month or less
  • Service fees for off-campus document storage
  • Facility use fees
  • Linen cleaning services
  • Water services
  • Coffee services
  • Indoor plant services, or
  • Rentals of miscellaneous furniture usually for a short event or duration (e.g., tables, chairs, tents)

Generally, the lease term is the non-cancellable period of the lease together with extension options that are reasonably certain to be exercised. A lease begins on the date on which the leased asset is made available for use. Leases often include options to either extend the term of the lease (often referred to as a "renewal option," or end the lease prior to its agreed-upon lease termination date (often referred to as a "termination option"), which affect the lease term for your requisition.

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Entering a Lease Agreement for Stanford

Stanford often enters into lease agreements for real estate, general purpose equipment (items such as office equipment and furnishings), or special purpose equipment (laboratory or other technical items related to research, scientific, medical, instructional, or other technical activities).

It's important to properly enter a lease into iProcurement, as Procurement and Capital Accounting / Property Management Office need to record certain information and run calculations for Stanford's financial statements.

To enter an equipment lease agreement, select "Standard Lease Equipment" from the Request Type drop-down list for a Non-Catalog Request if you are leasing general purpose equipment (items such as office equipment – e.g., copiers, furnishings) or special purpose equipment (laboratory or other technical items related to research, scientific, medical, instructional or other technical activities). To enter a real estate lease agreement, select "Standard Lease Real Estate" from the Request Type drop-down list.

Use the expenditure types below for leases. See Expenditure Type Listing Active Only for details.

Expenditure Types for Leases
Code Name
Equipment
52910 LEASED EQUIP > 1 YEAR; <5K
52921 LEASE GENRL PURPOSE EQUIP >5K
52951 LEASE SPECIAL PURP EQUIP >5K
52981 LEASED EQUIP 1 MO TO 1 YEAR
Real Estate
52810 RE LEASED SPACE >1 YEAR
52830 RE LEASED SPACE 1 MO TO 1 YEAR

It is recommended that instead of starting a new requisition for every year of the lease, the total lease term (in months) and amount (total of all cash payments associated with the lease term) should be in one requisition.

Notes:

  • Every lease must have a purchase order for it to be paid and tracked appropriately (i.e., no non-purchase order payments).
  • A lease should only be associated with one purchase order over the life of a lease. For example, a single five-year lease would not have five individual purchase orders each funding one year of the lease. If a lease is extended or changed, a change order should be entered that references the original purchase order.
  • The amount of base rent for the term of the lease should be entered into the appropriate lease template using an appropriate expenditure type (sales tax will be added as appropriate). Typically, base rent is the fixed lease amount that is paid on a regular basis (e.g., monthly or quarterly) excluding non-lease components such as maintenance, property taxes and variable charges (e.g., per-click charges on copiers).
  • If a lease has components not directly related to base rent, they should not be entered in the lease requisition template; a separate template should be used under the same purchase order (e.g., Standard Services) with the appropriate expenditure type (such as maintenance) instead.

For a step-by-step process on how to enter a lease agreement in iProcurement, see How To: Create a Standard Non-Catalog Requisition (Standard Lease).

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Entering a Standard Change Order for Leases

When certain terms of a lease change, for example, the duration of the lease or the total cost, complete a standard change order for the lease agreement by using the "Standard Change Order – Equipment Lease" or "Standard Change Order – Real Estate Lease" Request Type.

For a step-by-step process on how to change a lease agreement in iProcurement, see How To: Change a Standard Non-Catalog Purchase Order.

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Related Information

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Questions?

If you have questions, please submit a Support Request.

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