Article 16 of the Saudi Finance Lease Law

The lessee in a finance lease holds the benefit of the asset, not its ownership, as understood from the definition of the lessee in Article 1 as the person who holds the benefit of the leased asset under the contract. So this article prevents it from dealing with the asset's ownership in two ways:

• Creating rights over the ownership of the asset in favor of any party.
• Mortgaging the asset to a third party, such as by offering it as security for a loan or debt.

The only exception is that the lessee obtains the lessor's written consent. If that consent exists, the dealing is allowed within its limits.

The reason is clear: the asset is owned by the lessor, and a non-owner may not burden its ownership with rights for others without its permission.

This article is the counterpart of Article 15, which provides that if the lessor sells the asset to a third party, ownership passes burdened with the contract: the lessor deals with its property while the lessee's right remains, and the lessee does not deal with the asset's ownership except with the lessor's permission. It is also linked to Article 17, which provides that a movable asset keeps its character even if fixed to or attached to real estate.

If the lessee needs to offer the asset as security for financing, it must obtain the written consent beforehand. For any question on whether a particular dealing is valid, you can consult a lawyer specializing in banking, finance and finance lease cases.