Page 172 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 11: Leasing

2. Tripartite lease: In such lease there are three different parties Notes
(a) Equipment supplier
(b) Lessor (financier) and
(c) Lessee.

In such leases sometimes the supplier ties up with financiers to provide financing to
lessee, as he himself is not in position to do so.

Single Investor Lease

This is a bipartite lease in which the lessor is solely responsible for financing part. The funds
arranged by the lessor (financier) have no recourse to the lessee.
Leveraged Lease

This is a different kind of tripartite lease in which the lessor arranges funds from another party
linking the lease rentals with the arrangement of funds. In such lease, the equipment is part
financed by a third party (normally through debt) and a part of lease rental is directly transferred
to such lender towards the payment of interest and installment of principal.

Domestic Lease

A lease transaction is classified as domestic if all the parties to such agreement are domiciled in
the same country.

International Lease

If the parties to a lease agreement domiciled in different countries, it is known as international
lease. This lease can be further classified as:

1. Import lease and
2. Cross border lease.
Import Lease: In an import lease, the lessor and the lessee are domiciled in the same country, but
the equipment supplier is located in a different country. The lessor imports the assets and leases
it to the lessee.
Cross Border Lease: When the lessor and lessee are domiciled in different countries, it is known
as cross border lease. The domicile of asset supplier is immaterial.

Notes The term of the lease may be fixed, periodic or of indefinite duration. If it is for a
specified period of time, the term ends automatically when the period expires, and no
notice needs to be given, in the absence of legal requirements.
The term's duration may be conditional, in which case it lasts until some specified event
occurs, such as the death of a specified individual. A periodic tenancy is one which is
renewed automatically, usually on a monthly or weekly basis. A tenancy at will lasts only
as long as the parties wish it to, and be terminated without penalty by either party.
It is common for a lease to be extended on a "holding over" basis, which normally converts
the tenancy to a periodic tenancy on a month by month basis.

LOVELY PROFESSIONAL UNIVERSITY 167