Argentina has recently passed a new law on financial leasing aimed at effectively transforming leasing into a useful financial tool. The main aspects of the new law include the following:
Certain intangibles (like trademarks, industrial models and software) are now allowed to be the subject of financial leasing, while the prior law only allowed the leasing of tangible assets.
Any individual or entity may now be a lessor, where the former law only allowed financial entities or specific purpose companies to act in this capacity. The lessor may acquire the assets to be leased upon an specific request by the lessee, or even lease assets owned by a third party.
Sale-leaseback is now expressly allowed. In this connection, the new law also allows for rent payments over the life of the leasing and the price of the purchase option to be freely agreed between the parties (and not necessarily relate them to amortization). Moreover, the cost of additional services (like import duties, asset insurance etc) may be included in the rental payments.
The purchase option may be exercised at such time during the life of the agreement as determined by the parties, or upon payment of 75% of the total rent should the contract remain silent on the subject.
Leasing agreements be registered before the relevant public registry in order to be valid vis-à-vis third parties.
Upon bankruptcy of the lessee the receiver has the option to continue the lease, in which case all rentals accrued thereafter enjoy the highest level of priority. The same option applies in case of reorganization, in which case the lesee must pay all rentals already due and keep all rentals acrued thereafter up-to-date.
Upon default by the lessee, the lessor is entitled to executory proceedings for collection of overdue rent by presenting the court with the leasing agreement and evidence of a five-day cure notice given to the lessee. In the case of personal property leasing, the lessor may opt to: (i) request the seizure of the leased asset, terminate the agreement and collect only the overdue payments plus liquidated damages and interest; or (ii) demand acceleration of all pending rent payments and the option purchase price plus liquidated damages and interest, while the lessee keeps the leased asset. In the case of real property leasing, the lessor may, in addition to executory collection procedures, demand vacation of the premises, with prior notice to the lessee for a term that varies depending on how much of the total rental price has been paid at the time of default.
The new law eliminates strict liability of the lessor for any damages caused by the leased assets, leaving only the lessee responsible for such damages. This is a considerable departure from the general regime of the Argentine Civil Code, which establishes strict liability for the owner of goods considered to be dangerous or risky, and acquires special importance in the case of automobile leasing.
Lessor and lessee can agree to exclude liability of the lessor for marketability or hidden defects of the leased asset, except when the lessor is the manufacturer or producer of the asset or when the asset was owned by the lessor prior to the execution of the leasing agreement.
The right to receive rent payments and the purchase option price may be freely assigned by the lessor. For purposes of securitization of leasing agreements, the new law allows for en masse assignments without the need for notifying each individual lessee.
Payment of Value Added Tax (VAT) on leasing agreements is only due upon each payment (of rent or purchase option) becoming due or being actually received by the lessor (whichever comes first). Under the old law, VAT liability on the value of the entire contract arose upon delivery of the leased asset to the lessee. The new law further authorizes the executive branch to extend to leasing agreements a deferral regime for VAT payments, which regime (together with other tax aspects of leasing) is still to be further defined by administrative regulation.