Leasing immovable property

In the role of a leasee, you are not the legal owner of the subject matter of the lease as the legal owner is the lessor. You can agree upon one of the following possibilities: withdrawal from the leasing agreement with the possibility of a transfer of the lease to a new leasee, or the premature redemption of the subject matter of the lease which would make you the legal owner of the subject matter with which you can freely dispose of and sell.

We shall distinguish between the legal and economic ownership. In the case of financial leasing the leasee is the economic owner and not the legal owner of the subject matter of lease. However, in the case of operative leasing, the leasee is only the tenant of the subject matter of lease.

The insurance of the subject matter of lease shall be underwritten for the whole period of the leasing agreement with regard to the following type.

1. Vehicles: Third-party liability AO and general automobile CASCO (AK) (maximum 1% of the deductible).
2. Immovable properties: For cover in the event of natural disasters such as earthquakes, fires, floods, and the liability, if required, to the value of a new building.
3. Equipment: For cover in the event of theft, machinery breakdown, and flood.

The client can freely choose the insurance company for underwriting the property insurance.

• The choice of the immovable property and negotiations on price - client,
• Copies of the required documentation and eventual modifications - client + leasing company,
• The offer of financing terms by the leasing company - leasing company,
• Harmonisation of the financing offer - client + leasing company,
• The approval of offer – client,
• The approval of the transaction/lease by the competent company''s office (verification of the subject matter of the lease and of the legal status, leasee''s and guarantors'' ability to pay) - leasing company,
• The preparation and arrangement/harmonisation of the contractual documentation (purchase agreement and financial leasing agreement) and signature - client + leasing company + notary,
• The payment of taxes - matter of agreement (client or seller),
• The payment of private funding/deposit - client,
• The payment of the purchase price in compliance with the purchase agreement - leasing company,
• The take over of the immovable property and the signature of the handover report – client on the authority of the leasing company.

* The leasing company does not exert any influence on proceedings which it manages and for which the client /seller/investor is responsible; however, it can offer assistance and advisory services at all stages of the proceedings.

At present the tax on trading in real estate amounts to 2% of the estimated market value of the immovable property, which is not necessarily the contractual value. The tax on trading in real estate is paid at the signature of the purchase agreement in all cases where it is not the first sale (the taxable person is liable for the assessment of the duty and the seller for its payment, if not otherwise defined in the agreement). In the case of an initial sale of a new building the VAT is paid at the rate of 8.5% (this is to be modified on 1 January 2008). Nevertheless, the trade in immovable properties among legal entities can be performed according to the 20% VAT system.

The approval cost usually amounts to 1% of the transaction value and includes the drawing up of the purchase agreement; the other costs are the same as those which would be born by the client if he was buying the immovable property with regular financial means (the notarisation of the signature is usually paid by the seller in the amount of approximately 2,000 SIT, land register taxes, for the transfer of the property right taxes). The property insurance for immovable property shall be underwritten for the whole duration of the period against earthquakes, fires, or floods (or when the immovable property is exposed to risk) following the principle of due care and attention. The insurance company is chosen by the leasee himself and can even become the subject matter of the general policy of the client. There is no insurance premium for credit insurance – it is not required due to the credit insurance being the subject matter of the lease.

If the agreement with the client for the conversion of liabilities can not be reached, we start proceedings for the encashment of insurance after three unpaid monthly instalments. If the settlement is not possible, we instigate proceedings for the emptying of the immovable property and the return of ownership and later sale on the market.

Owing to the business policy of the company, which is adjusted to the appropriate regulations, the "sale and the leaseback transaction of the landed property" is not applicable for natural persons. Nevertheless, you can sell your landed property to the leasing company who will rent it to your partner, family member, etc. (in other words to a third person). The underlying element of immovable properties, namely, the land registered ownership of the immovable property on the side of the leasee. However, it is not possible to distinguish between the ownership of the building and the ownership of the landed property, on which the building is emplaced (legal provision). Considering the calculation of repayment of 31 million SIT with the maturity repayment term of 15 years, the monthly liability would amount to approximately 1.176 EUR*. Own landed property is considered as private funding, while the ownership (that of the landed property and the building) is transferred in totality to the lessor until the settlement of the liabilities according to the financial leasing agreement. The approval of financial means requires a clear situation with regard to the entry of the immovable property into the land register and of the eventual land register burdens, building permits and the ability to pay, which can be insured by sureties or pledges of another property. The financing can be approved only for the construction and the incorporated elements (not the movable properties, furniture, etc.).

*The interest rate does not comprise costs of approval and other costs, since we do not have enough data about these transactions and EOM cannot be sold.