The lessor came after both sides for the same machines

The situation

Six weeks after Ivan, Sanja and their daughter Camila took over a precision machining shop in Cambridge, a courier delivered a letter addressed to both the family's new corporation and the shop's previous owner. The equipment finance company that owned four CNC machines on the shop floor was demanding two missed lease payments and reserving the right to repossess the equipment mid-production. The letter named both parties because, as far as the lessor's records showed, both were on the hook, and it arrived with no warning during a week when the shop had three separate customer orders due to ship.

Ivan had spent two decades as a software developer and was ready to build something with his hands, or at least with the family's savings. Sanja, an actuary, had run the numbers on the purchase for months before agreeing it made sense, stress-testing the shop's order book and margins the way she would model any long-term liability. Camila, fresh out of an engineering program, was set to manage day-to-day operations, and part of the appeal of this particular shop was that its equipment was already calibrated for the aerospace-adjacent parts work she wanted to specialize in. The business itself was priced at roughly 3.2 million dollars, most of that tied up in the shop's specialized equipment, its customer contracts, and its trained machinists, several of whom had agreed to stay on through the transition.

The purchase had gone through as an asset sale, with the family's new corporation taking over the machining shop's contracts, inventory and equipment leases. The asset purchase agreement said plainly that the buyer would assume the equipment leases and the seller would be released from them on closing. Closing counsel for both sides had understood that consent from the lessor was in hand, since the seller's representative had said as much during negotiations. Nobody, it turned out, had actually confirmed that the lessor had signed anything, and the closing had proceeded on that assumption along with a dozen other routine confirmations that seemed, at the time, unremarkable.

The letter changed the picture immediately. If the lease had never been formally transferred, the seller was still the contracting party in the lessor's eyes, and the buyer's corporation had no clear standing to insist the equipment stay in place. Four CNC machines represented the shop's entire production capacity. Losing them, even temporarily, meant losing every order on the floor, and it meant the family's biggest asset, the machines themselves, sat on borrowed legal footing they had not known was borrowed at all.

What the law actually said

There is a real difference between an assignment and a novation, and the gap between them is exactly where this file went wrong. An assignment transfers a party's rights under a contract but does not automatically release that party from its obligations unless the other side agrees. A novation replaces one party with another, and it takes the agreement of everyone involved, the departing party, the incoming party, and above all the counterparty being asked to accept the substitution. It is that counterparty's consent that actually matters, because without it the original party stays on the hook no matter what the buyer and seller agree between themselves. The asset purchase agreement between the family and the seller used the language of assumption and release, but that agreement only bound the two parties who signed it. It could not bind the lessor, a third party who had never agreed to anything, no matter how clearly the buyer and seller had described their intentions to each other on paper.

For the lease to actually move to the new corporation, and for the seller to actually be released, the lessor had to consent in writing. That consent is what a novation agreement records, and it is a separate document from the purchase agreement entirely, one that needs the lessor's active participation rather than its passive assumption. Without it, the seller remained contractually liable for the lease payments no matter what the purchase agreement said between buyer and seller, and the lessor was entitled to look to either party, or both, for the missed installments, treating the purchase agreement's private allocation of responsibility as irrelevant to its own claim.

There was a second layer to the problem. Equipment leases of this kind are commonly registered against the equipment under personal property security law, giving the lessor a registered interest that follows the equipment regardless of who possesses it. That registration meant the lessor's claim to the machines themselves did not depend on sorting out who owed what. If payments stayed in arrears, the lessor's right to repossess the equipment was not in serious doubt, only its timing, and a registered interest of this kind generally takes priority over an unregistered buyer's expectations about what they thought they were purchasing free and clear.

None of this meant the family had done anything improper. It meant a step in the closing process, the actual novation paperwork, had been treated as done when it was only assumed. The purchase agreement had allocated the risk correctly on paper. It had just never been executed with the one party whose signature mattered, and because that gap sat quietly behind a lease that was otherwise being paid on time by the previous operator's old account details, nothing had surfaced it until the account itself fell behind.

It also mattered that this was not a case of a hidden defect the family should have caught through more diligence. Confirming novation typically means requesting the lessor's own signed consent as a closing condition, not simply relying on the seller's assurance that consent exists, a step easy to skip when a transaction has dozens of moving pieces and the seller's counsel represents that everything is in order.

What we did

1. Pulled the full closing file to confirm what had and had not been signed before saying anything to the lessor. We went through every document exchanged between the two sets of closing lawyers, correspondence included, and found the assumption clause in the purchase agreement but no separate consent or novation letter from the lessor anywhere in the file, which told us the gap was real and not a filing error on our end, and that we would need to fill it from scratch rather than simply locate a missing copy.
2. Contacted the seller's former counsel to ask whether a novation had been requested from the lessor before closing, since the seller's side would have initiated it if anyone had, and their file was the most likely place any partial record would exist. The response confirmed a request had gone out by email months earlier but no reply from the lessor had ever come back, and nobody had followed up before the file closed and everyone assumed the matter was settled.
3. Reconstructed the missing correspondence using the seller's email records and the family's own file, piecing together dates, amounts and account numbers so we had an accurate factual picture to bring to the lessor rather than a vague account of what everyone believed had happened, since a credit department dealing with a demand for money responds far better to specifics than to an apology without documentation behind it.
4. Opened direct contact with the lessor's credit department instead of leaving the conversation to a collections agent, because the people who could actually approve a retroactive novation were not the people sending demand letters, and reaching them early kept the file from escalating into a formal repossession process while the paperwork gap was still being sorted out, before a collections queue could take on a momentum of its own that a later phone call would struggle to reverse.
5. Proposed a retroactive novation agreement that would treat the new corporation as the lessee from the closing date forward and release the seller from that point on, supported by proof the business had been operating and generating revenue the whole time, which gave the lessor confidence the account was not actually at risk and that the request was about paperwork, not solvency.
6. Negotiated payment of the two missed installments from a small holdback the family had kept from the closing proceeds for exactly this kind of gap, which let us resolve the arrears without touching the business's operating cash and without conceding the missed payments were the buyer's fault, since the arrears predated the point at which the family had any legal responsibility for the account.
7. Finalized and registered the novation once the lessor's credit committee approved it, updating the personal property security registration so the equipment's registered interest correctly reflected the new corporate lessee, and confirming in writing that the seller's name had been fully released from the account, closing the loop the original transaction had left open for months without anyone realizing it, so no future search would turn up a stale registration the way this one had.

The outcome

The lessor's credit committee approved the retroactive novation about five weeks after the first demand letter arrived. The two missed installments were paid from the closing holdback, the seller was formally released from any further liability under the lease, and the four CNC machines stayed on the shop floor without interruption. No production time was lost, and no repossession notice was ever issued beyond the initial reservation of rights in the demand letter, which meant the customer orders scheduled to ship that first week went out on time.

The family did not have to pay anything beyond the arrears that were already owed on the account. There was no penalty, no rate increase, and no requirement to post additional security, which was not guaranteed going in. Lessors are not obligated to agree to a retroactive fix, and the credit department could reasonably have insisted on a fresh lease at current rates instead of simply stepping into the old one, which would have raised the shop's monthly costs for the remaining years of the lease term.

What made the difference was moving quickly and having a factual record to hand over rather than a dispute to argue. Once the lessor could see the business was solvent, the equipment was in productive use, and the paperwork gap was an oversight rather than a sign of trouble, there was no real incentive on their side to disrupt a working relationship that, from a pure numbers standpoint, was performing exactly as the original lease terms expected it to.

Camila now runs the shop day to day, the leases are current, and the family keeps a standing checklist from this file for anything they finance or lease going forward, requiring written lessor confirmation as a signed closing condition rather than a verbal assurance passed along secondhand. Sanja still calls it the cheapest insurance the business has ever bought, given how little it costs to ask for the signature compared to what a contested repossession would have cost in lost orders.

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