The contracts of financial leasing are a common phenomenon in economic activities. In case of absence of necessary current assets,the right of use and ownership of expensive equipment and other items of fixed asset could be obtained with the help of such contracts. The essence of use of financial leasing in economic activity involvesoptimization and rational use of resources.
The documents, which regulate legal relations arising when rent, leasing, including financial leasing, are the Civil Code of Ukraine of 16.01.2003, № 435-IV (hereinafter - CCU), the Economic Code of Ukraine of 16.01.2003, № 436- IV (hereinafter - ECU) and the Law of Ukraine “On financial Leasing” of 16.12.1997, № 723/97-VR (hereinafter - Law № 723).
According to Art.759 of CCU, under a hiring contract (lease) the lessor transfers or is obliged to transfer property to use to the tenant for a fee for a certain period. The subject of the contract in accordance with Art.760 of CCU could be the thing that has identifying characteristics and retains its original appearance when multiple use. A similar definition also is in the ECU: under a hiring contract the lessor transfers property to use to the tenant for a fee for a certain period to carry out the economic activities. An individually-defined property of production and technical purposes (or integral property complex), which does not lose consumer quality in the process of use, should be transferred in use (Art. 283 of ECU). Also it is determined that the tenant has the right to purchase the lease subject, if it is provided by the lease contract (para. 1 of Art. 289 of ECU).
In accordance with Art.1 of the Law № 723, financial leasing is a type of civil legal relations arising from the financial leasing contract. Under the contract of financial leasing, the lessor is obliged to acquire ownership of a thing from the seller according to established by the lessee specifications and conditions and to submit it to the use of the lessee for a definite period not less than one year for a definite fee (leasing payments).
Items of fixed assets are the subject to financial leasing contract in accordance with Art.3 of the Law № 723.
According to Art.6 of the Law № 723, the leasing contract should be concluded in written form.
To avoid problems when transactions within a financial leasing contract, and also when the use of leased assets, it is appropriate to provide for in the contract:
- procedure for receipt and transfer of the leased asset;
- rights and obligations of the parties;
- procedure for insurance of the leased asset;
- procedure for maintenance and repair of the leased asset;
- responsibility of the parties;
- procedure for termination and waiver of the contract.
Article 14 of the Law № 723 provides that the lessee during the entire residence time of the leased asset in its use should maintain it in a good condition. In addition, before the end of the lease term, the lessee should incur expenses of the maintenance of the leased asset associated with its operation, maintenance, repairs, unless otherwise provided by contract or law.
The lessee is entitled to improve the thing that is the subject of the leasing contract only with the consent of the lessor. If the improvement of the leased asset carried out without the permission of the lessor, the lessee is entitled to withdraw improvements implemented by him/her on the condition that they may be separated from the leased asset without any harm to it. If the thing’s improving is done with the consent of the lessor, the lessee has the right to reimbursement of necessary expenses or their cost enrolling on account of the lease payments (Art. 15 of the Law № 723).
According to Art.16 of Law № 723, payment of the lease payments is carried out in the manner prescribed by the contract. These payments include:
- amount that reimburses a part of the cost of the leased asset;
- payment as compensation for property received in on lease;
- interest compensation for the loan;
- other expenses of the lessor directly related to the performance of the lease contract.
In particular, such expenses could be the expenditures for:
- transportation, erection, installation of the leased asset;
- customs clearance;
- registration of the leased asset;
- receipt of warranties and third-parties guarantee by the lessor;
- compensation of insurance payment, if the insurance of the leased asset under the contract assigned to the lessor.
