Article 22 of the Saudi Finance Lease Law

This article deals with what happens to the contract if the asset is lost or its use is prevented, in four paragraphs:

1. Total loss: the contract is terminated if the leased asset is totally lost.
2. Partial loss that impairs benefit: if the lessor does not, within a suitable time, restore the asset to its condition or replace it with a similar asset that the lessee accepts, the lessee may do one of two things: terminate the contract, or agree with the lessor to continue the contract and adjust the rent in proportion to the partial loss. If the contract continues as it is, no rent is due for the period the repair takes, unless the lessor compensates the lessee during that period with another asset no less than the leased asset.
3. A ban by the authorities: if the competent authorities issue something that prevents all use of the asset, for no reason attributable to the lessee, the contract is terminated and the rent falls away from the time of the ban.
4. Financial settlement: 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.

Note that the second paragraph does not give the lessee a right to terminate immediately, but after a suitable time passes without the lessor repairing the asset or replacing it with a similar asset the lessee accepts. The detailed financial criteria are found in the Regulations, not the Law.

The article is linked to Article 21, which allows the lessor to stipulate a right to terminate and recover the asset when the lessee fails to pay, and to Article 23, which regulates the lessee's options on the lessor's bankruptcy or liquidation. If the parties disagree on the extent of the loss or what each is owed, you can consult a lawyer specializing in banking, finance and finance lease cases.