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Leasing (lease with option to purchase) or long term rental

Verified 09 March 2020 - Directorate for Legal and Administrative Information (Prime Minister)

The lease with option to buy (LOA), still called leasing, lease with promise of sale or leasing, should not be confused with long-term rental (LLD). Indeed, both formulas allow you to dispose of a property (often a car) without buying it, paying rent monthly. But the LOA is a credit agreement that offers the possibility of buying the property at the end of the lease, whereas the LLD is a simple lease with obligation of restitution.

Leasing: lease with purchase option (LOA)

Rental with option to buy (LOA), also called leasing, lease with promise of sale or leasingis a type of consumer credit. It is intended for the acquisition (temporary or not) of a car or other property.

You can use it if you are not sure to keep the property for a long time (for several years). You will only be a tenant for a fixed term (usually 24 to 72 months).

A bank or credit institution will purchase the property on your behalf and will own it. You agree to pay him monthly rent during this period and to use the property according to the terms of the contract. In the event of a payment incident, the owner may take over the property.

At the end of the agreed period of use, you can purchase the property and finally acquire it, or return it to the owner.

Contract Proposal

Leasing can be offered by a commercial brand. The seller must then inform you that this payment method is a type of credit. Your leasing will be managed by a bank or credit institution that is a partner of the seller who will own the property. This is the most common case.

Alternatively, leasing may be offered directly by a bank or credit institution.

In any case, the bank or credit institution is free to grant you the leasing on its own terms, in particular in relation to your financial capacity. The bank or institution may consult the bank files to check your situation.

Prerequisites

The contract must contain the following information:

  • Contact details of lender, borrower and sureties, if they exist
  • Description of the property concerned
  • Cash purchase price of the leased property
  • Lease duration (typically 2-5 years)
  • Amount remaining to be paid in case of purchase at the end of the lease
  • Rent amount and number
  • Warning of consequences of a borrower default
  • Existence of a withdrawal period
  • Address of the Prudential Control and Resolution Authority (ACPR) and that of the departmental directorate for the protection of populations (repression of fraud) competent in case of dispute

However, the overall effective rate need not be specified.

FYI  

if the contract so provides, the purchase can be made in the course of renting and not at the end.

If you accept the offer and sign the credit agreement, you have withdrawal period after signing.

You have 14 calendar days from the signature of the contract to carry out this procedure with the lending institution. You can use the form provided with your credit agreement or mail template:

Withdrawal of consumer credit

You must send your request by registered letter with acknowledgement of receipt.

The lender can claim a security deposit, which is a fixed sum or a percentage of the value of the leased product.

At the end of the lease, if you do not wish to acquire the property, the security deposit is returned to you.

If you decide to purchase the property, the security deposit is deducted from the remaining price.

Please note

the security deposit does not generate interest.

The amount and the number of rents you must pay are expected as soon as the contract is signed.

Some contracts include a 1to increased rent. Unlike the security deposit, this increase is not refunded to you if you do not purchase the property.

If you are in default of payment of rent, 2 cases may arise.

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Lender wants to terminate contract

You must then return the vehicle, pay the rent due and unsettled and an additional allowance based on the value of the vehicle.

The lender does not want to terminate the contract

Without debt deferral

You can keep the vehicle. The lender may claim compensation equal to 8% of the rent due and unpaid.

With debt carry-over

You can keep the vehicle. The lender may claim compensation equal to 4% of the deferred rents.

The cost of maintaining the property remains at your own expense as a tenant.

You must keep the product in good working order for the duration of the rental.

In case of hidden defect, it is up to you to arrange for the vehicle to be repaired.

If it's a car, you have to ensure you and at your own expense as if you were the owner, in accordance with the law. In the event of an accident, you will receive the insurance premium (the cost of repair both at your expense). The seller can offer you insurance. However, you can insure the property with the insurer of your choice.

In other cases, the lender may require you to insure the product at your expense.

Your leasing ends after a lease period defined in the contract, and usually ranges from 24 to 72 months. At the end of this period, your credit ends and you no longer have to pay rent.

You can then buy the property or return it to the owner establishment. Your choice between the 2 possibilities is free. Seller cannot make leasing conditional on a mandatory purchase.

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You wish to purchase the property

This possibility is also called purchase option.. You become the real owner of the property.

You will have to pay the difference

  • enters the value of the property as indicated in the contract
  • on the other hand, the rent already paid and the security deposit.

The value of the property as stated in the contract is higher than its market price, as it takes into account financial interests.

In any event, the final amount to be paid for the purchase of the property shall be fixed from the outset and shall be indicated in the original contract.

For example, if the property is €10,000 on the market when its value indicated in the contract is €13,000, and you have already paid €3000 deposit and paid €9000 rent, you still have to pay €1000, i.e. €13,000 -€3000 + €9000).

FYI  

for a car, if the gray card was in the name of the property owner, you must change..

You do not want to buy the property

You must return the property to the owning institution. You will then recover your security deposit. You don't have to pay anything anymore.

Mediation or conciliation

In the event of a persistent dispute (dispute over the amount of rent...), you can ask a third party to intervene. These may include:

Please note

you can find legal sources regarding unfair leasing contract terms on the website of the unfair terms commission ..

Seizure of justice

If mediation or conciliation has failed, you can go to court.

You can also request damages for the damage suffered. For example, if you feel you have paid rent in excess.

The competent judge shall protection disputes judge..

Long-term rental (LLD)

Long-term rentals (LLDs) are intended for the temporary acquisition of a car or other property.

You can use it if you do not want to become the owner of the property. You will only be a tenant for a fixed term (generally 12 to 60 months).

It is a specialized company that will buy the property and make it available to you. You agree to pay him monthly rent during this period and to use the property according to the terms of the contract. In the event of a payment incident, the owner may take over the property.

After the agreed period of use, you must return the property to the owner. There is no possibility to buy it.

The LLD is proposed by a specialized company. The landlord must provide you with a written proposal that includes the conditions of the rental:

  • Contact details of the landlord, tenant and sureties, if they exist
  • Description of the property concerned
  • Cash purchase price of the leased property
  • Lease duration (typically 1-5 years)
  • Mileage allowed over the term of the contract (if it is a car)
  • Amount and number of rents over the term of the contract
  • Amount of penalties for exceeding the authorized mileage
  • Amount of penalties for late payment or non-payment of rent
  • Warning of consequences of a borrower default

The landlord can ask for a security deposit, corresponding to a fixed sum or a percentage of the value of the leased product.

The contract states whether or not the security deposit must be returned to you at the end of the lease.

Please note

the security deposit does not generate interest.

The amount and the number of rents you must pay are expected as soon as the contract is signed.

Some contracts include a 1to increased rent.

If you are in default of payment of rent, the landlord can terminate the rental and request the recovery of the property, the payment of the rent due and the penalties.

The cost of maintaining the property remains at your own expense as a tenant.

You must keep the product in good working order for the duration of the rental.

In case of hidden defect, it is up to you to arrange for the vehicle to be repaired, but at the expense of the lessor.

If the property is subject to an insurance obligation, as is the case for cars, you must ensure as if you were the owner. In the event of an accident, you will receive the insurance premium (the cost of repair both at your expense). The landlord can offer you insurance, but you are free to insure the property with the insurer of your choice.

If the property is not subject to an insurance obligation, you are free to insure it or not, unless the contract requires it.

The RL ends at the end of the lease period defined in the contract, and generally between 12 and 60 months. At the end of this period, you no longer have to pay rent and you have to return the property to the owner establishment. However, the rental company can charge you if you have exceeded the mileage stipulated in the contract or if you have damaged the property. The method of calculating these fees and penalties must be defined in the contract.

Mediation or conciliation

In the event of a persistent dispute (dispute over the amount of rent...), you can ask a third party to intervene. These may include:

Please note

you can find legal sources regarding unfair leasing contract terms on the website of the unfair terms commission ..

Seizure of justice

If mediation or conciliation has failed, you can go to court.

You can also request damages for the damage suffered. For example, if you feel you have paid rent in excess.

The competent judge shall protection litigation judge..