Chapter One Finance Lease Contract
Article 2
1. The finance lease contract is a contract under which the lessor leases fixed or movable assets, rights, services or intangible rights in the lessor’s capacity as owner or owner of proceeds thereof, or a person able to own or produce such assets, provided that the lessor has obtained such assets for the purpose of leasing them, as a business, to a third party, as specified by Regulations.
2. Without prejudice to provisions governing Real Estate Ownership by Non-Saudis, ownership of leased assets may be conveyed to the lessee pursuant to the provisions of the contract either by stipulating that ownership conveyance is conditional on paying the dues of the contract, paying such dues plus a certain amount, promising to sell for a nominal price, paying the price agreed upon in the contract, paying the value of the leased asset at the time of concluding the sale contract, or by way of gift.
Article 3
A written or electronic contract shall be concluded between the lessor and the lessee and shall include information relating to contracting parties, leased asset and its condition, lease amount, payment terms as well as contract terms and conditions. The contract and any amendments thereto shall be registered in the contract register in accordance with the provisions of this Law.
Article 4
Prior to concluding the contract, the lessee may determine the specifications of the asset to be leased with the supplier, producer or contractor. The lessee shall be liable for any consequences resulting from determining asset specifications.
If such specifications were determined with the approval of the lessor, such specifications shall be binding to the lessor only within the limits of such approval.
Article 5
If the lessor authorizes the lessee in writing to directly receive the leased asset from the supplier, producer or contractor as per the conditions and specifications set out in the contract, such receipt shall be by virtue of a record establishing the conditions of the leased asset. The lessee shall be responsible vis-à-vis the lessor for any information about the leased asset stated in said record. If the supplier, producer or contractor refuses to sign the record, the lessee may refuse receipt of such asset.
Article 6
1. The lessee shall make the agreed lease payments on dates set in the contract regardless to whether the lessee benefits from the leased asset, unless the failure to benefit is caused by the lessor.
2. A condition to advance the maturity dates of future lease payments to be made by the lessee in case of default is permissible, provided such payments do not exceed the number of defaulted payments.
3. Part of the lease payments may be advanced, and the advance lease payments shall be refunded in case of failure to deliver the leased asset or benefit therefrom for a reason not attributed to the lessee.
Article 7
1. The lessee shall use the leased asset for the agreed purposes within the ordinary use and shall be responsible for performing the operational maintenance at his own expense according to prevailing technical practices. The basic maintenance shall be performed by the lessor unless agreed to be performed by the lessee. In such case, the basic maintenance shall be limited to wear and tear rather than inherent defect or fault in the leased asset.
2. The lessee shall promptly notify the lessor at his address of any occurrence that prevents whole or partial use of the leased asset, in accordance with the Regulations.
Article 8
The lessee may not make any alterations or modifications to the leased asset without a written consent by the lessor. Such consent shall determine the nature and scope of such alterations or modifications and the party responsible for the cost.
Article 9
1. The lessee shall not be liable for loss of the leased asset unless caused by deliberate act or negligence on his part. If such loss is due to deliberate act or negligence on the part of the lessee, he shall be liable to pay the value of the leased asset at the time of loss save for what is covered by insurance.
2. The lessor shall be liable for the consequences of loss if caused by the lessor or by force majeure.
3. The lessor shall be responsible to obtain cooperative insurance on the leased asset and shall not require it from the lessee.
Article 10
Tradable securities may be issued against the lessor’s rights in accordance with regulations and rules issued by the Capital Market Authority.
Article 11
The lessee may assign the contract to another lessee upon the lessor's approval. The Regulations shall stipulate provisions governing such assignment.
Article 12
1. The lessor may affix any information to the leased moveable asset to protect it, including the lessor’s name and the contract registration number in the contract register.
2. The lessor, or designee, may inspect the leased asset to ascertain the continuity of possession by the lessee and examine its condition, provided this is not harmful to the lessee as provided for in the Regulations and the contract.
Article 13
1. If the possession, operation or management of the asset subject of the contract requires obtaining a license, the lessee may apply to the competent authority to obtain such license based on the registered contract in accordance with the provisions of this Law. The license may be issued in the name of the lessor with an indication that the leased asset is in the possession of the lessee under the contract. This shall be specified in the Regulations.
2. Unless agreed otherwise, the lessee shall bear all statutory fees for obtaining the license and renewal thereof.
Article 14
The lessee shall be liable for damages resulting from use of the leased asset.
Article 15
If the lessor sells the leased asset to a third party, ownership of said asset shall be transferred encumbered by the contract.
Article 16
The lessee may not accord rights against ownership of the asset nor pledge it to a third party without the written approval of the lessor.
Article 17
If the leased asset is a moveable asset, it shall remain as such even if it turns into a fixed asset or is attached to a real estate.