Article 17 of the Saudi Finance Lease Law

Many assets leased under finance leases are movables that are fixed to or attached to buildings, such as generators, elevators, production lines and central air-conditioning units. The question may arise: do these movables become part of the real estate merely by being fixed?

The article answers clearly: if the leased asset is a movable, it keeps that character even if fixed to or attached to real estate. Fixing or attaching does not change its legal nature under this Law, and it remains a movable.

The importance of this is that the lessor's ownership of the asset is preserved as a movable, so under this Law the asset is not treated as part of the real estate it was fixed in merely because of that fixing. This reassures the lessor that it can finance assets which by nature need to be fixed.

The leased asset under Article 1 covers real estate, movables, benefits, services and intangible rights, and this article concerns the movable among them. It is linked to Article 16, which prevents the lessee from creating rights over the asset's ownership or mortgaging it except with the lessor's written consent, and to Article 18, which regulates establishing the contracts registration company and preparing a special register of contracts without prejudice to the Real Estate In-Rem Registration Law.

If a dispute arises over the description of an asset fixed in real estate, you can consult a lawyer specializing in banking, finance and finance lease cases.