Beata Kuczek-Maruta Opinion about: Good projections for SLB transactions

Sales based on a lease return is small. Transactions of this type is only 10 percent. of agreements concluded in the investment market since 2007 - according to a report of Colliers International. However, experts are optimistic. read full article >

Real estate leasing in Poland never gained the popularity of car or office equipment leasing. It is a result of specifics of legal and tax issues related to real estate transactions and the resulting formalities and risks.

Still, in times in which acquiring financing has become much harder, sale & leaseback of properties is becoming an interesting alternative to mortgage loan. Both financial instruments base on a commercial real estate which is the property of the investor ( borrower) and allow to get back the funds invested in its purchase or construction, which can then be allocated in current activity or other enterprises.

The difference lies in rights to the property which the financing institution receives. The mortgage loan is secured by a mortgage on a real estate, which remains the property of the borrower. In turn, in sale & leaseback transactions the ownership of the property passes over to the lessor, while the lessee has the right to use the property under leasing payments and to buy the property back for a nominal fee after the conclusion of leasing transaction.

Ownership is a stronger safeguard for a financial institution than a mortgage, so sale & leaseback gives a chance for greater flexibility in terms of credit rating or for more favorable terms of financing.

However, moving the property ownership automatically causes certain legal consequences which extend outside the financial objective of transaction – for instance the leasing company joining in a lease agreement in an office building or a shopping mall, which is the object of the sale & leaseback. That is why a sale & leaseback transaction has to be carefully thought through and precisely planned from a legal perspective.

The Lessees should also remember that their right to buy back the real estate after conclusion of the leasing period depends not only on fulfilling the terms included in the lease contract, but also on meeting all formal requirements specified in the law. Apart from the well-known requirement of the form of a notarial deed, there can be issues pertaining to statutory pre-emptive right or acquiescence of MSWiA for companies with foreign capital outside of EEA.


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