Sale And Leaseback Contract Template for the United Arab Emirates
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What is a Sale And Leaseback Contract?
The Sale And Leaseback Contract is a strategic financial instrument commonly used in the UAE business environment when organizations seek to unlock capital from their real estate assets while maintaining operational use of the property. This document type is particularly relevant in scenarios where companies need to improve their balance sheet position or require significant capital injection while continuing their business operations uninterrupted. The agreement must comply with UAE Federal laws, including the Civil Code and Commercial Transactions Law, as well as specific emirate-level property regulations. It typically includes detailed provisions for both the sale transaction and the subsequent lease arrangement, covering aspects such as property valuation, payment terms, lease duration, maintenance responsibilities, and compliance with local registration requirements. The document is structured to ensure enforceability under UAE law while potentially incorporating Sharia-compliant elements when required by the participating parties or financial institutions.
About the Sale And Leaseback Contract
A Sale And Leaseback Contract is a sophisticated financial arrangement that allows you to sell your property to a buyer while simultaneously entering into a lease agreement to continue occupying and using the same property. This dual-purpose document enables you to unlock the capital value of your real estate assets while maintaining operational control, making it particularly valuable for businesses seeking to optimize their financial position without disrupting their operations.
When do you need this document?
You need a Sale And Leaseback Contract when your business requires significant capital injection but you want to continue using your current property. This arrangement is commonly used during business expansion phases, debt restructuring, or when improving cash flow for operational needs. Property developers often use this mechanism to fund new projects while retaining use of existing assets. The document is also valuable when you need to convert illiquid real estate into working capital while avoiding the disruption of relocating your business operations.
Key legal considerations
The contract must clearly separate the sale and lease components while ensuring they work together seamlessly. You need to establish fair market valuation for the sale price, typically requiring independent property appraisal. The lease terms should reflect current market rates to avoid characterization as a disguised financing arrangement. Consider maintenance responsibilities, as the lease should clearly define who bears the cost of repairs, insurance, and property taxes. Include termination clauses that protect both parties' interests and specify what happens if the lease is breached. The agreement should address potential conflicts between your rights as a lessee and the buyer's rights as the new property owner.
Legal requirements in United Arab Emirates
Under UAE law, both the sale and lease components must comply with distinct legal frameworks. The sale portion falls under Articles 1324-1470 of the UAE Civil Code, requiring proper property transfer procedures and registration with relevant authorities. The lease component must comply with Articles 742-848 of the Civil Code governing tenancy relationships. In Dubai, you must register both agreements under Law No. 7 of 2006, while DIFC properties require compliance with DIFC Real Property Law. Commercial entities must also consider Federal Law No. 18 of 1993 governing commercial transactions. The contract may need Sharia compliance review if involving Islamic financial institutions, and all parties must be properly identified with UAE registration details for enforceability.
GOVERNING LAW
Applicable law
This Sale And Leaseback Contract is drafted to comply with United Arab Emirates law. Key legislation includes:
UAE Commercial Transactions Law (Federal Law No. 18 of 1993): Governs commercial transactions and relevant when the sale and leaseback arrangement is between commercial entities.
Property Law in Dubai (Law No. 7 of 2006): If the property is in Dubai, this law governs real estate registration and property rights, including requirements for registering both sale and lease agreements.
DIFC Real Property Law (DIFC Law No. 10 of 2018): Applicable if the property is located within the Dubai International Financial Centre (DIFC), governing property rights and registration requirements.
UAE Central Bank Regulations on Islamic Banking: Relevant for ensuring the sale and leaseback structure complies with Islamic finance principles, particularly if involving financial institutions.
Registration and Licensing Requirements: Local emirate-specific requirements for registering property transactions and obtaining necessary permits for lease arrangements.
UAE VAT Law (Federal Decree-Law No. 8 of 2017): Governs VAT implications of both the sale and lease components of the transaction.
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