Financial leasing contract in Ukraine


Leasing in Ukraine is something intermediate between rent and sale and purchase contract. Leasing relations in Ukraine are regulated by one clause of the Commercial Code of Ukraine, a couple of clauses of the Civil Code of Ukraine, but mainly by the Law of Ukraine "On Financial Leasing" effective as of January 10, 1998 with some subsequent amendments.

Clause 292 of the Commercial Code of Ukraine provides that the leasing is recognized as the commercial activity, which is directed to invest own or attracted financial means, which consists in transfer on the grounds of the leasing contract by one of the parties (the lessor) into exclusive use to the other party (the lessee) for certain period of time certain property, which belongs to the lessor or acquired by the lessor into his ownership on the ground of an order or approval from the lessee from the defined supplier (the seller) of the property on condition of payment by the lessee the regular leasing payments.

Depending on the nature of the leasing operations the leasing is divided onto two types: financial and operational leasing. The form of the leasing can be the leaseback, shared leasing, international leasing, etc.

Scope of the leasing can include movable property and real estate, which is destined to be used as the fixed asset.

Clause 806 of the Civil Code of Ukraine provides additional classification of the leasing and provides that on the grounds of the leasing contract one of the parties (the lessor) transfers or undertakes to transfer to the other party (the lessee) for enjoyment certain property, which is owned by the lessor and was acquired by the lessor without a preliminary agreement with the lessee (the direct leasing) or in accordance with orders and specifications, provided by the lessee, from a seller (supplier) (indirect leasing), for certain period of time and against payment (the leasing payments).

The common provisions, which regulate the rental relation in Ukraine, are applied to the leasing contracts as well.

In accordance with clause 807 of the Civil Code of Ukraine, scope of the leasing contract can include an inconsumable thing, which has the identifying characteristics and referred to be the fixed asset. Land plots and other natural objects cannot be included into scope of the leasing contract.

Clause 808 of the Civil Code of Ukraine provides rules of responsibility of a lessor and/or a seller (supplier) before the lessee. Thus, if seller (supplier) of the leasing object was chosen by the lessee in the frameworks of indirect leasing contract, the seller (supplier) of the goods is solely liable before the lessee within essential limits established by the Civil Code of Ukraine and other Ukrainian regulations. If seller (supplier) of the leasing object was chosen by the lessor, both the seller (supplier) and the lessor of the goods are liable solidary before the lessee within essential limits established by the Civil Code of Ukraine and other Ukrainian regulations.

The repairing and maintenance service of the leasing object is to be made by the seller (supplier) on the grounds of a contract between the lessee and the seller (supplier).

Risk of the accidental loss or damage of the leasing object falls on the lessee if otherwise is not provided by the leasing contract. This rule is provided by clause 809 of the Civil Code of Ukraine.

The Law of Ukraine "On Financial Leasing" effective as of January 10, 1998 with some subsequent amendments provides more detailed regulations of the financial leasing in Ukraine in addition to the regulations provided by the Commercial Code of Ukraine and by the Civil Code of Ukraine.

In accordance with clause 1 of the Law of Ukraine "On Financial Leasing", the financial leasing (hereinafter referred to as "the leasing") is recognized as the type of civil law relations, which appear on the grounds of the financial leasing contract (hereinafter referred to as "the leasing contract").

On the ground of the leasing contract the lessor undertakes to acquire title for the thing form its seller (supplier) in accordance with specifications and requirements provided by the lessee and to transfer such thing for enjoyment of the lessee for certain period of time, which is not less then one year, against payment (the leasing payments).

Scope of the leasing contract in accordance with clause 3 of the Law of Ukraine "On Financial Leasing" can include an inconsumable thing, which has the identifying characteristics and referred to be the fixed asset in accordance with current Ukrainian legislation. Land plots and other natural objects, integral property complexes of companies cannot be included into scope of the leasing contract. The state property can be included into the scope of the leasing contract as well, if otherwise is not provided additionally by the laws.

Clause 4 of the Law of Ukraine "On Financial Leasing" provides the following participants of the leasing relations:

- the lessor – a corporate entity, which transfers the title of possession and use for the leasing object to the lessee;

- the lessee – a natural person or a corporate entity, which gets the title of possession and use for the leasing object from the lessor;

- the seller (supplier) – a natural or a corporate entity, from which the lessor acquires the thing, which then will be transferred as the leasing object to the lessee;

- other natural persons and corporate entities, who are participants of a multilateral leasing contract.


Sub-leasing is allowed and governed by clause 5 of the Law of Ukraine "On Financial Leasing".

Clause 6 of the Law of Ukraine "On Financial Leasing" provides requirements as regarding the form and essential terms and conditions of the leasing contract. Thus the leasing contract is to be made in the written form. Duration of the leasing contract is to be in accordance with requirements of the above law. The essential conditions of the leasing contract are:

- the leasing object;
- duration of the leasing;
- other terms and conditions, which have been agreed by either of the parties of the contract.

The lessee also has the same rights to protect the leased property as the owner of such property.

The base rights and responsibilities of the lessor are provided in clause 10 of the Law of Ukraine "On Financial Leasing".

Therefore the lessor has the following rights:
- to invest own and borrowed assets in order to buy the object of the leasing;
- to check if the lessee holds terms of the leasing as concerning the use and keeping the leasing object;
- to withdraw the leasing contract on grounds provided by the law;
- to claim for termination of the leasing contract and return of the leasing object on grounds provided by the law;
- to cover delayed leasing payments in uncontested proceeding on the grounds of notary's record;
- to claim the lessee in order to recover losses on grounds provided by the law and the leasing contract;
- to claim the lessee in order to return the leasing object and to discharge the financial liabilities in certain situations.

The lessor has the following obligations:
- to transfer the leasing object to the lessee on terms and conditions, provided in the leasing contract;
- to warn the lessee about all known defects of the leasing object;
- to discharge bona fide and timely the obligations related to maintenance of the leasing object;
- to recover the lessee his costs for improvement and/or maintaining and/or repairing of the leasing object;
- to accept the leasing object in the case of premature termination of the leasing contract or expiration of the leasing period.

The base rights and responsibilities of the lessee are provided in clause 11 of the Law of Ukraine "On Financial Leasing".

Therefore the lessee has the following rights:
- to choose the leasing object and the seller of the same or to establish certain requirements as concerning the leasing object;
- to withdraw acceptance of the leasing object, which does not comply with designation of the same, terms and conditions of the leasing contract and/or requirements;
- to claim for termination of the leasing contract or to withdraw the leasing contract on grounds provided by the law and the leasing contract;
- to claim the lessor in order to recover losses caused by poor fulfillment or non-fulfilment of the leasing contract.

The lessee has the following obligations:
- to accept the leasing object and use it according to designation of the same and to the leasing contract;
- to discharge bona fide and timely the obligations related to maintenance of the leasing object and to retain it in the functional condition;
- to pay the leasing payments in time;
- to allow lessor's access to the leasing object and ensure possibilities for the lessor to verify due use of the leasing object;
- to notify the lessor and the seller of the leasing object about all the found defects and faults of the leasing object in writing;
- to notify the lessor and the seller of the leasing object about all the delays in making the current or the season maintenance and/or non-maintaining of the leasing object in writing;
- to return the leasing object at expiry or premature termination of the leasing contract in the same condition considering the essential wear & tear of the same.

The lessee bears the risk of accidental loss or damage of the leasing object starting from the moment of acceptance of the same if otherwise is not provided by the leasing contract.

Clause 14 of the Law of Ukraine "On Financial Leasing" provides that the lessee has to maintain the leasing object through full leasing period in the good working condition and bears the costs related to the leasing object maintenance.

The leasing payments are to be made in strict accordance with the leasing contract. In accordance with clause 16 of the Law of Ukraine "On Financial Leasing" the leasing payments can include:

- amount, which recovers a part of the leasing object value;
- payment to the lessor for the leasing service;
- coverage of credit interest;
- other expenses of the lessor, which are connected with the leasing contract.

The above information is provided herein in educational and informative purposes only. It is provided that you have to get appropriate legal advice as regarding the legal and other issues of your interest in Ukraine in order to have the exact, extensive and up-to-date legal and other related information.

Do not hesitate to contact us if you have any questions or issues of legal nature, our Law Firm is working for you and our experienced legal specialists are always ready to help providing the client with appropriate legal consultations, legal reports and summaries, reasonable legal advices and all the other required legal support, assistance, coverage and protection.

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