Alsuwaidi & Company

The New Federal Law on Financial Lease

  • Due to the inability of some individuals to own properties or movables of high value that exceed their financial limits, the federal legislators were led to issue a law on Financial Leasing.
  • This law aims to make individuals of limited income invest in immovables and movables in long-term installments. These individuals are entitled to own these properties after the completion of the agreed lease period.
  • It has been indicated in Article (2) of this Law that all entities providing “Finance Lease” activity in the UAE must be licensed to do so by the UAE Central Bank (thus any Finance Lease Contract entered into with an unlicensed Lessor is deemed null and void). It is also prohibited for any unlicensed person to engage in this activity or to use the term Finance Lease or any equivalent thereof.
  • The elements that should be included in a Finance Lease contract are names and details of the lessor and the lessee, detailed description of the leased asset, the term of the Finance Lease contract, rent amount and number of payments, due dates and terms and conditions of the delivery of the leased asset.
  • This law regulates the ability of the Lessee or the Lessor to assign or transfer its rights and/or obligations in a Finance Lease Contract to a third party, this assignment includes rights, obligations, and ownership upon prior written consent of the other party. Such waiver shall be in accordance with the provisions of the law.
  • This law sets out penalties for those who carry out financial leasing without a license so that only licensed companies are under the supervision of the Central Bank.
  • The main purpose of this law is to provide opportunities for many investors and individuals to own movables, real estates, and other immovables through long-term payment methods.