Legal Protection Of The Lessor’ Rights In Financial Leasing

Financial Leasing came from1950s. This transaction is a new kind of tradingtool which combines of finance funds and assets. It is called sunrise industry bydeveloped countries. During the operation of financial leasing, lessee touch withvendors by themselves and search for the equipments depend on their ownrequirements. They make preliminary agreement with vendors about specification,type, quantity and delivery date. Then they present the requirements of leasing tolessor and sign a contract once it is approved by lessor. Lessor signs a sales contractwith vendor referring to the preliminary agreement. Vendor can deliver lease to lesseeafter it is done. It is the obligation of lessee to check the lease. Tenancy term is startedonce lessee makes verified confirmation of lease. Lessee should pay the rentaccording to the contract. Lessor rights are the easiest to be injured because of theirbridge roles in the transaction. For one reason, financial leasing lasts for a long period,and whether the lessor can collect rent on time depends totally on the credibility of thelessee, thus leading its high uncertainty. For another reason, the lease is speciallypurchased for the transaction by the lessor according to the lessee’s needs, so it is lackof market versatility. Once the lessee breached the agreement, the lessor would beunable to protect themselves even if the lease can be recovered. Because it’s hightough to handle the recovery of the leased property and how to solve thus problem isworth being analyzed. The truth that the leased property is in the possession of thelessee and used by them makes the lessor lost actual control to the lease. Once thelessee malicious sanctioned the lease, lessor’s interest and right would be underunsecured circumstances. Accordingly, the article mainly discusses legal risks that thelessor would encounter during the whole transaction from the perspective of the lessor, in order to protect the lessor’s legitimate interests, and further provide some usefulsuggestion to improve finance lease legal system.This article consists of three parts, introduction, body and conclusion thereof.The body with five chapters is the main content of the whole paper.The first Chapter summarizes the legal characteristics of finance leasestransactions by comparing definition of finance leases concept of domestic andforeign. The parties may involved in the transaction are also mainly analysis. It alsoclearly distinguished such specific transactions points from others by discussingqualifications, rights and obligations of parties.The second Chapter introduces the main operational processes about financelease transactions, and draws the interests of the lessor’s are most vulnerable amongthree parties by using deductive inductive approach. It also give interpretation one byone of legal risk faced by the lessor. And further focus on classifying these risks thatare discussed in the text.The third Chapter discusses the largest legal risks lessor may face, namely creditrisk. And then put forward proposals about establishing relevant legal system bylearning from foreign existing legislation and experience, from both theory andpractice perspective.The forth Chapter discusses the rights and risks faced by the lessor. It can bedivided into interpreting the reason of risk, briefing developed countries’ relevantlegislation and practice, giving suggestion to better such legal system.The fifth Chapter discusses risks towards lease matters faced by the lessor, andthen analyzes the arising causes of such risk find the root cause. It put forwards somegood suggestions to avoid such risks based on legislative model from relevantinternational conventions.