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A lease contract is a written agreement between a leasing company (lessor) and a customer (lessee), whereby the lessor purchases an asset and the lessee uses it for an agreed period in exchange for a fixed fee. It is an unnamed agreement, so the terms of the contract determine virtually everything.
What is leasing?
In leasing, the leasing company purchases an asset — for example, a car, machine, or equipment — and makes it available to the lessee for a fixed periodic fee. Leasing is not regulated separately by law; it is an unnamed agreement. Consequently, the provisions in the lease contract itself are all the more important.
Operational or financial lease
Broadly speaking, there are two forms. With an operational lease, you use the asset, the lessor remains the economic and legal owner, and maintenance and risk often lie with the lessor; it resembles renting. With a financial lease, you bear the risk and maintenance more like a buyer, and there is usually a purchase option at the end. The distinction has implications for ownership, risk, and accounting and tax treatment.
What is stated in a lease contract?
A lease contract regulates, among other things: the leased asset, the term, the remuneration and payment terms, who is responsible for maintenance, insurance, and damage, what happens in the event of early termination, and whether there is a purchase option. Read these provisions carefully; they fully determine your rights and obligations.
Pay attention to the term and termination
Lease contracts often run for several years and are not always easy to terminate early; stopping prematurely can be costly. Check the duration, the cancellation and termination conditions, and any penalties before you sign.
Frequently Asked Questions
Do I become the owner of a leased asset?
With operational lease, usually not; with financial lease, often via a purchase option at the end. That depends on the type of lease and the contract.
Who pays for the maintenance?
In the case of an operational lease, it is often the lessor, while in the case of a financial lease, it is usually the lessee. Check this in the contract.
Can I terminate a lease contract early?
Not always easy; stopping early can be costly. Read the termination terms in advance.
Have a lease contract reviewed?
Our legal experts review or draft your lease agreement. View our contract lawteam, have your terms checked, or schedule a free consultation.
