Article 21 of the Saudi Finance Lease Law

This article deals with the most serious thing a defaulting lessee may face: termination of the contract and recovery of the asset.

Its provisions are as follows:

• The right needs a stipulation: the article allows the lessor to stipulate this right, so it rests on what is provided in the contract.
• The reason: the lessee's failure to pay installments due.
• Controls in the Regulations: this is as the Regulations determine. The Law itself did not set the number of overdue installments that justify termination or the procedures, but referred them to the Regulations.
• Achieving fairness: this must be in a way that achieves fairness between the two parties to the contract.

The article is linked to Article 20, which requires the lessee to hand the asset back to the lessor when the contract ends, is terminated or its term expires unless it chooses to own it under the contract, and to Article 22, whose paragraph 4 provides that the Regulations set the criteria for what each party is entitled to when the contract is terminated or dissolved during the lease term, in a way that achieves fairness between the parties in accordance with Sharia principles, taking into account insurance compensation due.

A lessee who falls behind in payment should review its contract to see whether it includes this condition, and refer to the Regulations to know the controls. In cases of default or a claim for recovery, it is advisable to consult a lawyer specializing in banking, finance and finance lease cases.