Finance Lease Law

Purpose and scope

• Governs finance leases in which the lessor leases fixed or movable assets, usufructs, services or intangible rights it acquired for leasing; ownership may pass to the lessee under the contract, conditional on payment or by a promise to sell (Article 2).

Key rules, rights and obligations

• The contract must be written or electronic, stating the parties, the asset and its condition, the rent and its due dates and the term, and be recorded in the contracts register with any later amendment (Article 3).
• The lessee pays the rent on time even without using the asset unless the lessor caused this; the contract may accelerate future instalments on late payment, up to the number of instalments in arrears (Article 6).
• The lessee uses the asset for the agreed purpose and bears operating maintenance (Article 7), may not alter it without written consent (Article 8), and is liable for damage caused by its use (Article 14).
• The lessee bears the loss of the asset only for misuse or negligence, and then pays its value less any insurance cover (Article 9).
• If the lessor sells the asset, ownership passes subject to the lease (Article 15); the lessee may not pledge it or create rights over it without written consent (Article 16).
• The contract ends on total loss of the asset, and the lessee may terminate for partial loss that impairs use if the lessor does not repair or replace it within a reasonable time (Article 22).

Violations, penalties and common problems

• Erasing the marks on the asset, altering it, or selling or pledging it without the lessor's written consent is punishable by a fine of up to a quarter of its value, prison of up to three months, or both (Article 26).
• Common problems: late instalments triggering acceleration, and disputes over what each side is owed on termination.

Procedures and key deadlines

• The lessor may reserve the right to terminate and recover the asset if the lessee fails to pay, as the regulation sets (Article 21); the lessee returns the asset in the agreed condition at the end of the lease (Article 20).
• If a fixed asset is not returned, the lessor may ask the competent court for an order to hand it over, to be decided within thirty days (Article 25).
• The competent court hears disputes and violations (Article 24).

An advisory summary prepared by Al-Bayan Al-Wadih Law Firm. It is not an official text and does not replace the law, its implementing regulations, or advice from a specialised lawyer. The official published text and its amendments prevail.