There are several financing formulas for companies to acquire their offices, premises or warehouses. One of them is real estate leasing. But what is it exactly? It is a lease contract whose objective is the transfer of use of movable or immovable property in exchange for the periodic payment of some installments. When the contract ends, the lessee has the option to acquire said good.
The properties that can be financed through this formula are all those dedicated to commercial activity, services, industry, etc. The most common are commercial premises, and industrial buildings.
Real estate leasing has several peculiarities. One of the most outstanding is its duration, since it has a minimum of ten years. Regarding its formalization, and as explained by the Spanish Association of Leasing and Renting (AELR), it includes several operations: sale of the property (by the lessor); finance lease (between lessor and lessee); and, where appropriate, purchase and sale by exercising the purchase option (between lessor and lessee). All these operations are formalized in a public deed.
On the advantages that leasing entails for companies. From AELR they highlight the flexibility in terms of the amount of the fees. “The amount of the installments will be adapted, as far as possible, to the customer’s ability to pay. In addition, leasing provides the lessee with both obvious tax savings in direct and indirect taxes and the possibility of accessing an additional tool for the management of working capital, by being able to prorate the VAT payment of the financed transaction, it improves its treasury”, highlights José Coronel de Palma, president of AELR.
In addition, it must be remembered that, in the second and subsequent transfers of the leased asset, this operation is exempt by law from both the Documented Legal Acts tax and the Patrimonial Transfers tax.
Another advantage is the application of a special tax regime to the operation consisting, mainly, in the accelerated depreciation of the asset. To this we must add that the leasing company advises the client free of charge on the details of the operation, so there is no need to go to an advice that would be paid. Until the property is not in operation, the tenant only pays interest.
product crisis
According to data from the Spanish Leasing and Renting Association (AELR), new investment in real estate leasing stood at 728.63 million euros in 2020, which is the lowest annual figure since the historical series began in 2003 and it barely reaches 20% of the levels prior to the outbreak of the economic crisis in our country. In addition, so far this year, there is hardly any growth of 3% over the figures for the previous year.
“In reality, the biggest crisis in this product came with the last financial crisis of 2008, and it had not yet recovered from it when the pandemic hit. The recovery in recent years of the Spanish economy, and, in particular, of the market real estate, have been unevenly noted in the use of the leasing formula for the financing of real estate by companies in the period of time between 2013 and a 2020 financial year clearly marked by the effects of the Covid 19 pandemic on the economy in general”, explains José Coronel de Palma, president of AELR.
Regarding the delinquency ratio, it stands at around 1% of formalized operations, and “it will probably be maintained, or will improve, in the short term,” says Coronel de Palma.
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