Standards for Wear and Use of Leased Property
Question
With regard to standards for wear and use of leased property, which of the following statements is true?
Answers
Explanations
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A. B. C. D.C
The correct answer to the question is C: A lessor must provide a notice of wear and use standards on motor vehicle leases.
The wear and use standards refer to the conditions that a lessee (i.e., the person who leases the property) must adhere to in order to avoid incurring additional charges or penalties when returning the leased property to the lessor (i.e., the person who owns the property and leases it to the lessee). These standards typically apply to leased motor vehicles, but may also apply to other types of leased property, such as equipment, furniture, or appliances.
The Federal Reserve Board's Regulation M, which implements the Consumer Leasing Act, requires lessors to disclose certain information to lessees in motor vehicle leases, including a description of any charges that may be imposed for excessive wear and use. The lessor must provide a notice of the wear and use standards to the lessee before or at the time of lease inception.
The notice of wear and use standards must include a brief and concise statement of the lessee's responsibilities for the leased property, including any specific wear and use standards that the lessor will apply at lease end. The notice must also describe any charges that may be imposed for excessive wear and use, and provide examples of such wear and use.
In contrast, answer A is incorrect because lessors are not required to adhere to the manufacturer's standards for wear and use of the leased property. Although lessors may take the manufacturer's standards into account when setting their own standards, they are not bound by them.
Answer B is also incorrect because lessors are not required to develop and disclose their own standards for wear and use of leased property, although they may choose to do so. The main requirement is to disclose any wear and use standards that will be applied at lease end and any charges that may be imposed for excessive wear and use.
Answer D is incorrect because the lessor is still required to provide a notice of wear and use standards on motor vehicle leases, even if they impose an automatic, standardized charge. The notice must include a description of the standards and charges, as well as any examples of wear and use that may trigger additional charges.
