Leasing: what is it and how does it work?

The term leasing, or financial leasing, refers to an atypical contract that can be applied to different sectors. There are various regulatory standards, but the basic functioning remains the same.

The leasing contract can have different facets, but there are some common rules, which must always be respected. Its most recent legislative definition dates back to Law 124 of 2017.
In the next lines we will describe the main characteristics and functioning of this type of contract.


  1. What is leasing?
  2. How does it work?
  3. Types of leasing
  4. Real estate leasing

What is leasing?

Leasing is an atypical contract stipulated between two subjects:

  • The user;
  • The grantor.

The relationship between the parties involved is quite simple: the former requires the latter to be able to enjoy a movable, registered or immovable property. If the request is accepted, consent is generated for the establishment of the contract.

READ ALSO: Real estate leasing: how does it work and what are the advantages?

The contractual object, therefore, is the provision of temporary enjoyment of an asset . The consideration corresponds to a periodic fee that the user is required to pay to the grantor.

At the end of the agreed period, or at the contractual expiry, three different situations can occur:

  • The leased property is returned;
  • The contract is renewed by agreeing to pay a lower fee;
  • The asset is purchased by the user, with the payment of the relative price.

How does it work?

In the previous paragraph we illustrated the basic characteristics of a leasing contract, let’s now focus on its functioning.
When the contract is stipulated, the grantor delivers the leased asset to the user, and from that precise moment he is responsible for it, so he must provide for both ordinary and extraordinary maintenance.

READ ALSO: Operating leasing: how does it work?

But what happens if the goods are not delivered on time, or if there are defects or damage resulting from transport? The risk is assumed by the user, in the sense that any actions that can be taken against the manufacturer are at his expense.

In any case, all charges to be borne by the user must be expressly indicated in the contract.

READ ALSO: Possession and detention: definition and differences

Types of leasing

The legislator has distinguished two different types of leasing:

1) Operational, or enjoyment

When the duration corresponds to the economic-technical one of the asset, and the rent to the consideration of the enjoyment. It is an asset that becomes obsolete in a short time . In the event of early termination of the contract, the periodic fees already paid are not returned.

READ ALSO: Bank guarantee: what it is, types and costs

The art. 1458 of the Italian Civil Code , states in fact:

The termination of the contract for non-fulfillment has retroactive effect between the parties, except in the case of contracts with continuous or periodic execution, for which the effect of the termination does not extend to the services already performed.

2) Translational, or financial

The contractual object is an asset that at maturity will have a higher value than the price established for the purchase. In this case, three parties are involved:

READ ALSO: Right to reconsider: when and how can it be exercised?

  • Producer;
  • Grantor lender;
  • Financial user.

The purpose is to finance a person who needs to purchase capital goods for an economic activity.
The resolution for non-fulfillment in this case is governed by art. 1526 cc :

If the termination of the contract takes place due to the non-fulfillment of the buyer, the seller must return the installments collected, without prejudice to the right to a fair compensation for the use of the thing, in addition to compensation for damage.
If it has been agreed that the installments paid remain acquired by the seller by way of indemnity, the judge may, according to the circumstances, reduce the agreed indemnity.
The same provision applies in the event that the contract is configured as a lease, and it is agreed that, at the end of it, the ownership of the thing is acquired by the tenant as a result of the payment of the agreed rents.

READ ALSO: Administration contract: what is it and how does it work?

Real estate leasing

Real estate leasing is part of the translation type. In this case the parties are:

  • Lessor;
  • Seller;

To buy a property in this way, you must first contact the owner company and agree on the price, delivery times and everything you need to obtain building permits. Subsequently, a loan must be requested from the leasing company . The latter will purchase the asset.

READ ALSO: 730: What do you need to bring to do it? Part 2

Also in this case, the user party assumes all the risks associated with the construction of the property.

What do you need to know about the registration of properties?

  • Real estate leases with a duration of more than nine years are subject to registration. They also include the hypothesis of a contract relating to a right of enjoyment, as happens in the financial lease;
  • If there are several subjects with a right of enjoyment on a lease, the one who transcribed the deed first prevails.


by Abdullah Sam
I’m a teacher, researcher and writer. I write about study subjects to improve the learning of college and university students. I write top Quality study notes Mostly, Tech, Games, Education, And Solutions/Tips and Tricks. I am a person who helps students to acquire knowledge, competence or virtue.

Leave a Comment