What is a nonappropriation, and what is its impact on a 103 lease?
A governments right to nonappropriate means that the government has the ability to terminate the 103 lease without penalty if it does not appropriate, in its budget for a fiscal period, funds that are designated to meet its payment obligations under the lease. This has the effect of limiting the governments contractual payment obligations to those arising in the fiscal period for which an appropriation has been made. The government is not required to make future appropriations, and the result is that the lease payments are deemed a current expense and not debt. It is important to understand that a nonappropriation is not an event of default. It does not give rise to any lessor remedies or rights to demand damages, except to recover the equipment. It is also important to understand that the right of nonappropriation is a necessary evil. Without it 103 leases would not be permitted in most states. Thus, be very careful of trying to contractually limit the governments ability to nonapprop
