The leasing activities are playing an active role in the business development all around the world . The benefits to all parties in the leasing activities are enormous and of great effect for their business affairs .
Leasing finance has been greatly and directly involved in many projects in different sectors including transportation , energy , communication , oil and gas , seaports and airports , educational facilities , sports facilities …etc
The leasing contract , between the lessee and the lessor , should specify the details needed for each leasing phase . The leasing phases could include , the organizational phase , the financial phase , the operational phase and the transfer phase .
Each of the above mentioned phases , and other additional phases if any , include different specific details that should be agreed upon between the lease contracting parties . The leasing contract , legally speaking , could be very detailed in some cases due to the technical nature of the project . However , to avoid uncertainties or different interpretations the leasing contract should contain very specific and clear-cut details .
Regarding the organizational phase , we could say , the duties and the role of each party should be explained . The type of leasing arrangement required , the equipments , the spare parts , the duration of the lease , the price , the terms of payment … .. and other items , if any , should be explained .
The financing part in the leasing agreement could involve many parties , banks or financial institutions in a syndicated arrangement . The type of debt or financial facilities , the equity components , the liens and mortgages … needs certain details and reference in the leasing contract . It is important to refer to the source of the finance in case of foreign investors .
The most important part , in leasing activities , could be the operational part or phase . This phase includes all required details necessary for the operations and undertaking of the leasing transaction by each party . The leasing contract should include the necessary operations for each party .
The equipments needed for the operations being , cargo or passenger airplanes , ships , construction equipments , building cranes , earth removals , cars … should be identified and figured out before the operations start . Many difficulties or legal issues and or administrative problems between the leasing parties occurred because there is no specific sufficient details regarding the equipments to be utilized during the lease agreement .
The leasing parties are required to consult competent technical personnel to help in identifying the proper and suitable equipments needed for the required activity . There , also , should be certain provisions in the leasing contract to allow for replacement or return of the equipment in case of default or beak-down .
The leasing contract should include detailed provisions required for the transfer phase . This part comes at the end of the required work or at the end of the construction of the project . The transfer phase depends on the agreement between the leasing parties . The parties could agree on either BOT ( BUY , OPERATE & TRANSFER ) , or BOO ( BUY , OPERATE & OWN ) , or BOOT ( BUY , OPERATE , OWN & TRANSFER ) . These are the common standard types of transfer methodology .
Almost all leasing contracts are agreed upon to include one of these types of transfer , of course , this depends on the requirements and needs of the contracting parties . Each party is obliged to seek the most appropriate type and provide for that in the leasing contract . In other words , whether to agree on full ownership or transfer of the project after certain duration .
Many Governments , nowadays , are giving big projects to contractors on leasing basis agreement . The Governments are required to be more careful with reference to the details regarding the transfer phase , particularly , the details regarding the take – over of the project from the contractor .
Dr . AbdelGadir Warsama Ghalib
Founder & Principal Legal Counsel
Dr.AbdelGadir Warsama Consultancy
E-mail : awarsama@warsamalc.com
