CPA Bulletin

44 CPA Bulletin > February 2024 www.cpa.uk.net Q&As: 3 We have received an invoice from our supplier (who is not another CPA member) for an item of equipment that was stolen that had been on hire to us at the time. The value of the lost item seems disproportionately high, and wondered - as a guide - whether there was anything within the Model Conditions which could help calculate the value? There is no methodology within the Model Conditions to calculate the value of a lost/stolen item. The reason being is that the membership as a whole, offers such an array of plant and equipment of different values/ages/conditions/etc. that it would be impossible to produce any meaningful mathematical table to assist you. That aside for the moment, clause 13(b) simply states that the Hirer/ Customer is liable for all loss and damage to the plant during the hire period. Historically, the calculation of the lost plant is based on its market value; however, how that market value is calculated can be fraught in the current second-hand market, where in some recent instances, the asset has appreciated in value rather than depreciated. You could independently look at identical products which are for sale by other vendors, to give an estimation, as well as speaking with manufacturer to see if they can help. Once you have some more information, you could still query the amount you are being charged by your supplier. However, it may be dependent on what the supplier’s terms and conditions state, as to how the cost was calculated. The first thing to clarify is whether there is actual damage to the plant/equipment, or if this was simply ‘fair, wear and tear’. The customer is liable if it is the former, but not if it is the latter. Should there be any claim for damage (long) after the hire had ended, then this may be challenged by the customer. The Model Conditions does not specify a timeframe in which the owner must inform the customer of the damage, but any delay in informing the customer should be explained. Once this damage can be attributed to a particular hire, then that customer is liable under clause 13(b) of the Model Conditions. As the conditions falls under contract law – each contract has effectively a ‘shelf life’ of 6 years - so even if the hire ended a few weeks earlier, they would still apply. I am happy to discuss this further if you wish. After having a look through the Model Conditions, I cannot see anywhere if the customer is responsible for any repairs post-hire to put the equipment back into the same state and condition when it was hired out. Is there anything? It can be very difficult to quantify what deposit you ask for, as there are a number of factors to consider: who the customer is, what machine they are looking to hire, etc. The first issue is whether the customer is a business or a homeowner. If it is the former, then the business would normally have hired-in plant insurance cover, so any damage should be covered, if that is a particular concern to you. However, a policy such as that will have an excess, so that could be a starting point when deciding what deposit to ask for. Other factors affecting the deposit being asked for, could include the plant’s value and age. For a homeowner, who is unlikely to have any insurance cover, this may be provided by you as some form of damage waiver – where the customer pays 15-20% of the hire rate. [You would need to obtain such a policy from your insurance provider before you can offer this facility to customers.] If that is all agreed, then again, any excess under the policy could be addressed by the homeowner paying a deposit - again subject to the value of the item they are looking to hire. The method in calculating the deposit is up to you, but the CPA does not have any specific sums to recommend as it will be on a case-by-case basis. I wondered if you could provide any guidance on any deposit, we ask our customer for.