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What is Finance Lease?

Corporate Lawyers of Dubai have elaborated the Law including the rights and obligations of lessor and lessee through this article.
The Concept Financial leasing is a concept wherein a licensed company (the lessor) purchases the asset of their customer (the lessee) on lease for a certain period of time in return of a mutually agreed payment schedule. Similar to other lease agreements, the lessor is obliged to maintain the assets while the lessee enjoys the possession of the asset for a said duration, bearing all costs linked to the maintenance of the asset.
License Requirements Article 2 of the Law strictly prohibits the company from undertaking financial leasing without the relevant license; the law reads as follows: "Engaging in financial leasing activity In line with the foregoing, the Article 3 states that the lease contract shall be written and should be registered or an indication thereof in a special register in accordance with the provision of this law otherwise it will be nullified. Components of the Contract The lease contract shall be constituent of the following information as laid down by Article 4 of the Law: The council of ministers shall maintain a register detailing the lease contracts entered into by parties.
The register must include the parties managing the contract, the fees for registration and the other relevant data as mentioned by Article 5 of the Law. Rights and Obligations of the Lessor and Lessee Obligations of the Lessee (Article 6) Unless otherwise agreed in the contract, the Lessee shall abide by the provisions of the contract; Obligations of the lessor (Article 7) Unless otherwise agreed between the parties under the contract, the lessor undertakes to: Rights of the Lessee (Article 8) Unless otherwise agreed in the contract, the Lessee shall have the following rights: Rights of the Lessor (Article 9) Unless otherwise agreed in the contract, the lessor shall enjoy the following rights: Relationship with the Supplier (Article 10) Usage of the property The tenant may take any legal action against any third parties who restrict his rights to use the property subject to the following conditions, in accordance with Article 12 of the Law: Further, the property shall be returned in the same way as received by the lessee and any changes shall be at the cost of the tenant.
The lessee may compensate for any changes made on the leased property even with the written consent of the lessor if it cannot be separated from the rented property without damaging them (Article 13). Lessee not entitled to any compensation for fortifications it has made on leased property at its own expense regardless of written consent from the lessor.
Lessor if also entitled to transfer the premises to another lessor, taking written notice from the lessee and it shall not result in a reduction of rights or any new obligations. The law empowers the tenant to waive of his rights and obligations to another tenant for replacing him, provided that the following conditions are met: Termination and revocation of the contract shall result in the revocation or invalidation of the legal suit filed by the tenant.
Impact of Liquidation Liquidation of the lessor (Article 23) In the event of liquidation or bankruptcy of the lessor, the lessee shall have the right to exercise either of the following two options: Liquidation of the lessee (Article 24) Without prejudice to any rules governing liquidation and bankruptcy in the State, the liquidation of a lessee or the bankruptcy or death of a person shall be taken into consideration as follows: Termination of the Contract Either party has the right to terminate the contract on relevant conditions as prescribed by the Law. Article 26 of the Law lays down the rights of the lessor to terminate which are as follows: On the other hand, Article 27 of the Law provides for Lessee's right to terminate the contract under the following circumstances: The lessee shall provide 60 days written notice to the lessor for remedying the breach, and the contract can be dissolved upon the failure of the lessor to perform his obligation.
The lessee shall be entitled to his claims due to him upon the dissolution of the contract. Apart from the termination of the contract, the Law also grants the Central Bank of UAE to cancel the license of the lessor under the following conditions as mentioned under Article 31 of the Law: Penalties The law imposes strict punishments including fine and imprisonments for those who violate any provision of this law.
Article 33 of the Law imposes of imprisonment and a fine of not less than two hundred thousand dirhams and not exceeding ten million dirhams or one of these penalties on anyone engaged in financial leasing activity or using a lease term Finance in its trade name without a license. Furthermore, a fine of not more than AED 500 000 shall be punished by a fine on any person who violates any of the provisions of this law shall be liable to the decisions issued and the Council of Ministers shall issue a decision specifying the irregularities and the amount of the fines prescribed for each.
Source: Free Articles from ArticlesFactory.com Dr. Hassan Elhais, has made a name for himself as a renowned specialist in the fields of Family law, civil law, company incorporation, construction law, maritime law, banking law, criminal law, inheritance law, and arbitration.
He and his team in Dubai and Abu Dhabi cover the entire UAE and provide sound and accurate legal advice. They maintain the highest standards of integrity, confidentiality, and discretion.
Dr Elhais' goal is to ensure that a consistently high standard of service is undertaken and delivered by his team..