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7400 Herning
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Bredgade 67
6900 Skjern
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Leasing 

At Kirk Larsen & Ascanius, we have the expert knowledge and experience to advise the lessee as well as the lessor in relation to negotiation and drafting as well as execution and termination of leasing agreements. Therefore, we know from practice that there are specific challenges with respect to e.g. the following elements related to leasing agreements; part II of the registration certificate, friction wheel press, trench excavators, special vehicles, pigs, scaffolds, solar cell systems, milk cooling plants, light and sound amplifier equipment, and stables, but we also know that there are available solutions.

The handling of leasing agreements in terms of accounting and tax (operational and financial) is important, and we are able to contribute to “governance” and optimisation.

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During the past 50 years, the use of leasing agreements has constantly increased (however, with a setback in connection with the financial crisis from 2007 to 2008). Since 2001, the annual level for new leasing agreements has reached approx. DKK 50 billion and with a rising tendency since 2013.

When a business has to choose the best way to finance its purchases, leasing is one of the many forms of financing which should be considered. Leasing may be an alternative to purchasing items on credit in return for a retention of title to the seller. Alternative forms of financing includes ordinary bank loans with or without security (in the form of pledge, mortgage, floating company charge or surety) and factoring (charge of the company’s outstanding receivables), but all these statutory forms of financing are not as flexible as leasing which is not regulated to the same extent by law.

Leasing of items gives the lessee a financial ease, since the lessee does not have to pay for the leased items from the first day. In practice, a lessee will often prepare a business plan indicating that the lessee’s income from the business exceeds the current lease payment, among other things due to the use of the leased item. In addition to this there are advantages following from the applicable VAT and tax rules as well as the fact that leasing does not require any registration in the land register and consequently no registration fee has to be paid. Therefore, leasing is a reasonable alternative – or supplement – to pledge in assets or to floating company charge.

Leasing will give the lessee the business benefit that the lessee, in a low interest market characterised by high recession, and with increasing attempts to escape from ownership by focusing on the use of this potential, may gain interest from its investment.

Leasing agreements are based on the fact that the lessor has and keeps the right of ownership to the item, while the right of use is transferred to the lessee during the agreed term. Therefore, it is basically a rental agreement, but leasing agreements differ from traditional rental agreements among other things in the way that it is the landlord (lessor) who is financing the user’s (lessee’s) purchase or use. This is illustrated e.g. by the fact that it is the lessee who usually specifies the item through its communication with the supplier, but also by the fact that the total leasing payments to be paid by the lessee during the non-terminable period, with the addition of the residual value of the leased item, is equivalent to that the entire financing amount is repaid to the lessor. This means that the rules pertaining to landlord and tenant law cannot be used uncritically to govern the relationship between the parties to the leasing agreement if the agreement is silent.

In theory, leasing agreements may concern all kinds of items right from minor office machines and telephones to ships and planes and may also concern real property. In practice, there is a variety of contracts for leasing of cars. The calculation of the leasing payment is closely connected with the handling of purchase and sale of cars in terms of indirect taxes, just as the resale value (second-hand value) of the car is part of the calculation.

Carsten Ceutz
Carsten Ceutz