REITs pilot issuance

Affordable housing is undoubtedly the C position in the current housing rental market. The intensive introduction of a series of policies from the central to local governments has put affordable rental housing on the fast track of development.

The development of the leasing market cannot be separated from financial support. It is very important for practitioners to clarify the main financing channels for affordable housing and their respective attributes.

Maidian Space Leasing now sorts out the main housing leasing financing channels (infrastructure REITs, quasi-REITs, corporate bonds) and representative cases as follows:

Infrastructure REITs

REITs (Real Estate Investment Trusts) - Real estate investment trusts are standardized financial products based on real estate assets.

On June 29, 2021, the National Development and Reform Commission issued the "Notice on Further Improving the Pilot Work of Real Estate Investment Trust Funds (REITs) in the Infrastructure Sector" (Development and Reform Investment [2021] No. 958), Officially include affordable rental housing within the industry scope of infrastructure REITs issuance.

Previously, infrastructure REITs pilot projects gave priority to supporting infrastructure shortcomings projects and encouraged new infrastructure project pilots. Mainly include:

1. Warehousing and logistics projects.

2. Toll roads, railways, airports and port projects.

3. Urban sewage and garbage treatment and resource utilization, solid waste hazardous waste medical waste treatment, and bulk solid waste comprehensive utilization projects.

4. Urban water supply, power supply, gas supply and heating projects.

5. Data center, artificial intelligence and intelligent computing center projects.

6.5G, communication tower, Internet of Things, industrial Internet, broadband network, cable TV network engineering.

7. Intelligent transportation, smart energy and smart city projects.

8. Encourage national strategic emerging industry clusters, high-tech industrial parks and characteristic industrial parks to carry out pilot projects.

Representative Case 1

Shenzhen Talent Anzhu Group REITs Project

According to the relevant person in charge of Shenzhen Talent Housing Group Co., Ltd., the basic assets of the project These are 4 projects located in the core areas or locations of Shenzhen. They have all obtained affordable rental housing certification, with an overall occupancy rate of 99%, involving 1,830 affordable rental housing units, a construction area of ??134,700 square meters, and an assessed asset value of approximately 1.158 billion yuan. . The property rights of the project are clear, with continuous and stable cash flow, and can meet the yield requirements for issuing REITs.

According to the relevant person in charge, “The pilots of affordable rental housing REITs in Beijing, Shanghai, Chongqing and other places are advancing. It is expected that more affordable rental housing REITs will appear in the future, and regulatory authorities will China will continue to accelerate the review and standardization process and improve relevant supporting policies, promote the construction of the affordable rental housing REITs market, and establish a new model for the development of the affordable rental housing system "

Real estate investment trust funds

At present, there are no strict laws and regulations related to REITs in China. The products currently issued on the market partially comply with the REITs standards of mature foreign markets, so they are called REIT-like products.

Representative Case 2

National-Beijing Affordable Housing Center Public Rental Housing Asset Support Special Plan

On August 18, 2021, my country’s first public rental housing REITs The product - "National Development Bank-Beijing Affordable Housing Center Public Rental Housing Asset Support Special Plan" (hereinafter referred to as the Special Plan) was successfully issued, opening a new chapter in public rental housing REITs.

China Development Bank and Beijing Financial Holding Group are the unified coordinators of the "China Development Bank-Beijing Affordable Housing Center Public Rental Housing Asset Support Special Plan". China Development Bank and Beijing Financial Holding Group are the special plan managers and lead underwriters, Beijing Affordable Housing Center is the special plan asset service agency, and the Capital Construction Investment Guidance Fund is the fund manager. The underlying assets are public rental housing held by the Beijing Affordable Housing Center. The priority securities of this special plan are rated AAA, have a term of 18 years, and an issuance scale of 400 million yuan.

As the first public rental housing REITs product in China, this special plan has received careful guidance from the China Securities Regulatory Commission, Shanghai Stock Exchange and other competent authorities, as well as great attention and strong support from the Beijing Municipal Government and units at all levels. It has found a way out for all aspects involved in financing public rental housing assets and made useful explorations for legal compliance

This special plan has many innovative features: the innovative use of REITs as a financing tool in a market-oriented manner , effectively revitalizing the stock of public rental housing assets and improving the ability of public rental housing to rely on its own cash flow for financing; the assessed value of the asset determines the financing scale of public rental housing, increasing the space for public rental housing assets to rely on their own value for financing; only paying The product structure of not repaying the principal with interest reduces the debt repayment pressure of public rental housing enterprises.

Reit-like financing has improved the financing capabilities of public rental housing companies, strengthened support for housing for low- and middle-income families, expanded financing channels for affordable housing projects, promoted the healthy and sustainable development of the housing rental market, and established a "multiple The housing system of "main supply, multi-channel guarantee, and equal emphasis on renting and purchasing" has important guiding and demonstration significance.

Corporate bonds

Corporate bonds refer to loan certificates issued by joint-stock companies with additional capital within a certain period of time. Compared with the indirect financing method of bank loans, corporate bonds, as a form of direct financing in the capital market, have certain cost advantages.

According to incomplete statistics from Maidian, in 2021, 16 corporate bonds specializing in housing rentals were issued, with a cumulative issuance amount of 37.262 billion yuan. The vast majority of issuers are real estate companies, including major real estate companies such as Vanke, China Resources, and Poly.

Representative Case 3

Beijing Capital Entrepreneurship Group’s 500 million yuan housing rental special corporate bond

On April 15 this year, Beijing Capital Entrepreneurship Group Co., Ltd. An announcement was made that the 2023 public issuance of housing rental special corporate bonds (for professional investors) (second phase) has been successfully issued.

Among them, the principal amount of the bond is 500 million yuan, the coupon rate is 3.18%, and the term is 3 years.

Representative Case 4

Beijing Affordable Housing Center Co., Ltd.

The company’s 1.5 billion yuan corporate bond

Beijing Affordable Housing Center Co., Ltd. The company has also recently publicly issued corporate bonds.

It is reported that the scale of this bond issuance does not exceed 1.5 billion yuan (including 1.5 billion yuan), and the coupon rate is 3.09%.

According to the prospectus, the bonds issued by the Beijing Affordable Housing Center to professional investors have a term of no more than 25 years (inclusive). The bonds are fixed-rate bonds, and the coupon rate will be determined according to the online inquiry. The price bookkeeping result shall be determined through negotiation between the issuer and the lead underwriter. The interest payment method adopts simple interest calculation, the interest payment frequency is annual interest payment, and the principal is repaid in one time when the bond matures.

The funds raised by the Beijing Affordable Housing Center from this issuance of bonds will be used to repay maturing debts, supplement working capital, project construction and operation, and other purposes permitted by applicable laws and regulations.

If we want to vigorously develop affordable rental housing, financial support will be one of the issues that market entities need to urgently solve.

In July 2021, the State Council issued the "Opinions on Accelerating the Development of Affordable Rental Housing" (Guobanfa [2021] No. 22), clearly proposing to further strengthen the financial support for affordable rental housing projects. Support, support long-term bank loans, and support leasing companies in issuing corporate bonds, corporate bonds, non-financial corporate debt financing instruments and other corporate credit bonds, etc. At the same time, the state and local governments have gradually included affordable rental housing into the pilot scope of REITs.

In the future, with the continuous advancement of REITs pilots, market-oriented rental housing is also expected to be included in the scope of REITs, becoming another blue ocean for China's REITs.

At present, what housing rental companies urgently need to do is to give full play to the advantages of market entities, strengthen operational capabilities, broaden financing channels, and wait for favorable policies. Related Q&A: What does equipment financing lease of 10 million yuan mean? 1. Financing lease means: the enterprise selects the equipment. We purchase the equipment according to the enterprise's choice. After purchasing the equipment, we rent the equipment directly to the enterprise. The enterprise repays the lessor's equipment rent on schedule and transfers the ownership of the equipment to the enterprise. 2. For example, I If you want to spend 10 million to buy equipment and go to the bank to borrow money to obtain credit, you first need collateral or pledges. The repayment plan is simple and it takes up a personal or corporate credit line. This means that if I borrowed 10 million, if I still need it for development, The funds may be rejected because the bank will evaluate my repayment ability and there are various conditions and so on. Moreover, the single repayment form of this 10 million loan will increase the cash flow pressure of emerging enterprises. 3. First, financial leasing is an off-balance sheet business and will not affect other financial loans. To put it bluntly, it will not be listed on the credit report; second, financial leasing equipment costs are lower, the life is longer, the pressure is lower, and the threshold is lower than that of banks. Low; third, the repayment method is free and flexible. It is all debt but there is plenty of room for flexibility. Related Q&A: What is financial leasing?

In the process of participating in the financial leasing business, many lessors are faced with the situation that the rent cannot be collected and the leased property cannot be retrieved or disposed, thus suffering huge losses. In order to understand the legal risks contained in financial leasing projects more clearly and to better respond to the risks, the author consulted professional books and materials related to financial leasing, combined with the findings discovered during the actual handling of financial leasing project cases. In a more typical situation, according to the three stages before the signing of the financial lease contract, during the performance, and after the dispute occurs, the lessor's relevant risks in the financial lease project are organized and summarized, and risk prevention suggestions are put forward, hoping to provide relevant people with some references.

1. Common legal risks for lessors in my country’s financial leasing business

1. Common risks before signing a financial leasing contract

1. The lessee provides false materials, resulting in The lessor’s misunderstanding

In order to gain the trust of the lessor and obtain financing, some lessees may provide false qualification certificates, financial information, and asset certification materials to respond to the lessor’s investigation, and even Some lessees fabricate projects and provide false contracts, invoices and other materials to defraud financing funds, and the authenticity of some materials cannot be easily distinguished.

Based on the false materials provided by the lessee, the lessor is likely to have a wrong understanding of the project, economic strength or qualifications for which it is applying for financial leasing, and thus approve the project application and issue financing, resulting in a series of subsequent risks.

2. Lessors do not pay enough attention to risks, resulting in the selected lessees not having appropriate qualifications and abilities

Some lessors do not pay enough attention to risks, and do not establish a complete credit review within the unit and risk management mechanisms. There are situations where only the quantity of projects is valued but quality is ignored, credit review is not in-depth or there is "formalism", and the review and judgment of the lessee's financial status and solvency are ignored. Business personnel usually pursue sales performance. , will do everything possible to facilitate the project transaction. This neglect of risks has led to uneven credit status and abilities of lessees engaging in business cooperation, and some lessees even lack the ability to fulfill their debts and operate well, increasing the probability of financing risks such as "bad debts".

3. The lack of essential elements of the financial lease contract leads to defects in the financial lease relationship [1]

During the process of concluding the financial lease contract, due to the lack of legal knowledge of some lessors or If the internal supervision of the enterprise is not standardized, it may happen that there is only a financial lease contract but no sales contract for the leased property, the leased property sales contract is not performed, the subject matter of the leased property sales contract is not clearly stated in the financial lease contract, the rent is not clearly agreed, etc. , which results in the legal relationship of the financial lease contract being deemed to be "named financial lease but actually a loan". Once a financial lease contract is recognized as a loan contract, there will be obvious adverse effects on the lessor: First, the lessee does not have to pay rent to the lessor, but only needs to repay the principal and interest of the purchase of the leased object, and the interest may be paid by The originally agreed handling fees, interest, overdue interest, etc. are converted into calculations. If the collectively calculated interest exceeds the legal proportion, the excess portion will not be protected. The interest calculated in this way is usually less than the income calculated based on the financial leasing business. [2]; Secondly, the ownership of the leased object will belong to the lessee and does not need to be returned to the lessor. At this time, the leased object can no longer be used to protect the lessor's creditor's rights; thirdly, the security measures established for the financial lease creditor's rights will not be guaranteed due to the law of the main contract. The relationship is different, there is a risk of being deemed invalid, etc. In this way, it not only violates the original intention of entering into the financial lease contract, but may also cause greater losses to the lessor.

(Pictures quoted from the Internet)

2 Common risks during the performance of financial lease contracts

1. The lessee does not pay rent as agreed in the contract

This is the most common and most influential legal risk in financial leasing projects. Since the rental payment cycle of financial leasing projects is usually long, and the establishment and operation of some projects will be affected by national or local policies, the lessee will It is not uncommon for rental payments to be delayed or unable to continue due to various reasons during the operation of the project. For example: The income of photovoltaic power generation projects depends largely on state subsidies. However, in practice, there are situations where the subsidies that should be paid are in arrears, resulting in the lessee being unable to pay the corresponding rent in full; infrastructure projects may be affected by weather conditions. , policies and other factors lead to delays in construction and failure to complete; the income of production projects may be significantly affected by the market, resulting in lower-than-expected income. These will cause the lessee to be unable to pay rent in full and on time as stipulated in the financial lease contract, and may even cause difficulties in subsequent operations, hindering the progress of the entire project.

In addition, financial lease contracts usually stipulate that if the lessee fails to pay rent, it will need to bear overdue interest or penalty interest, and the calculation standard for overdue interest or penalty interest is usually much higher than the normal performance interest originally agreed upon. Then, if the lessee is unable to pay the rent due to continued insufficient funds, once it becomes overdue, the funding gap may continue to expand and the ability to pay the rent may be further reduced.

2. The lessee’s failure to properly keep the leased property causes damage or loss of the leased property

In financial leasing projects, although the ownership of the leased property belongs to the lessor, the actual possession and It is the lessee who uses the leased property[3], and it is difficult for the lessor to manage the leased property. If the lessee fails to fulfill its obligation to take good care of the leased property[4], resulting in damage or loss of the leased property, even if the lessor can still require the lessee to pay rent[5], this situation will inevitably damage the lessor's ownership of the leased property, thereby causing If the lessor reduces or loses the protection of its claims through the leased property, it is very likely to cause economic losses. Moreover, the leased property no longer exists, which may also cause certain obstacles in determining whether the financial lease relationship is established in the event of a dispute, exacerbating the lessor's risks.

3. The lessee disposes of the leased property without authorization

In view of the separation of the ownership and use rights of the leased property in the financial leasing project, although the lessor enjoys the ownership of the leased property, the leased property Possession, use and income belong to the lessee, and management is also the responsibility of the lessee, that is, the leased property is actually under the control of the lessee.

Although the law prohibits the lessee from disposing of the leased property without authorization, it is difficult for the lessor to ensure that the lessee will not sell, sublet, or mortgage the lease. Once the above-mentioned behaviors occur, even if the Civil Code sets out the requirements for the lessor, Remedies[6], but may still infringe upon the lessor’s ownership of the leased property—especially in the case where the lessee transfers the leased property without authorization. If the leased property is acquired by a third party in good faith, the lessor will completely lose the leased property. Even if the ownership of the property can be recovered from the lessee, it will consume a lot of extra energy and financial resources. In addition, if the lessee is unable to compensate, it will further cause greater losses to the lessor.

4. The lessee fails to deposit the fees collected into the supervision account as agreed (taking power station projects as an example)

In financial leasing projects where the lessee obtains income through fees , the lessor usually agrees with the lessee to set up a supervision account to deposit financing funds and fees collected by the lessee to protect the lessor's claims. Taking power station projects as an example, what is stored in the supervision account is the electricity fee collected by the lessee. The lessor will require the lessee to pledge the right to charge electricity fees to the lessor and pay the income from electricity sales to the supervision account. However, in practice, it is not the case that the lessee fails to fulfill this obligation and adopts various methods (such as requiring the electricity user to pay the electricity bill to other accounts, paying the lessee in cash or bills, etc.) to avoid the electricity bill entering the supervision account. Rarely, some projects even have no electricity revenue in their supervision accounts, making the pledge method a "dead letter."

In practice, the realization of the property value of electricity fee charging rights depends more on the financial ability and willingness to perform of the party that should pay the electricity fee. In the legal relationship between power generation enterprises and power grid operating enterprises or power users, If the electricity bill is not paid in full and on time, due to the relative nature of the contract, it is difficult for the lessor to directly make demands against the lessee's debtor, that is, the actual power purchaser. If the party paying the electricity bill does not pay the electricity bill to the supervision account, but settles privately with the lessee in other ways, and the lessee does not proactively inform and fulfill the agreement to deposit the electricity bill into the supervision account, it will be difficult for the lessor to realize the corresponding rights. , even difficult to know.

5. The lessee’s assets and custody accounts have been seized or frozen by the court due to other cases.

In the event of a dispute between the lessee and a third party, the court may seize the financing due to other cases. The leased property and custody account under the lease shall be seized as the assets of the lessee. Although the lessor can seek relief at this time by applying to the court for reconsideration or enforcement objections, the time limit and outcome of the court that accepts the reconsideration or enforcement objections are unpredictable and there is great uncertainty. Moreover, if the lessor does not know about the seizure and the lessee does not take the initiative to inform it, it is likely that the leased property will be disposed of and the creditor's rights cannot be protected through the supervision account.

3 Common risks after disputes occur

1. It is difficult to file a criminal case

If the lessor believes that a financial lease project dispute is suspected of a criminal offense (many (Contract Fraud). Since most criminal cases related to financial leasing have the characteristics of overlapping criminal and civil crimes, when the public security organs receive reports, most of them tend to inform the victims to seek relief through civil litigation. Even if the clues and evidence that the case constitutes a crime are relatively complete and obvious, the public security organs may refuse to accept the case for various reasons (perhaps to prevent wrongful interference in economic activities or other considerations). Therefore, if it occurs in a financial leasing project In cases such as suspected contract fraud, it is difficult to pursue the criminal liability of the lessee through the public security organs.

2. The guarantee provided by the lessee is difficult to effectively cover losses

In financial leasing projects, the lessor usually requires the lessee to provide certain guarantees to minimize the risk of the lessee’s default. Losses caused to the lessor, such as setting up a guarantor, setting up a mortgage, equity pledge, etc. However, in practice, when a lessee breaches the contract, it often happens that the guarantee measures cannot compensate for the lessor’s losses. For example, natural person guarantors usually have very weak guarantee capabilities and can bear minimal responsibilities; legal person guarantors are usually related to the lessee, and when the lessee is at risk, the guarantor's guarantee ability is often insufficient; the collateral is mostly within the control of the lessee. If the mortgagor refuses to perform its obligations or the mortgaged property is damaged or lost, it will be difficult for the lessor to make up for its losses by exercising the mortgage right; equity pledge usually means that the shareholders of the lessee pledge their equity interests in the lessee to the lessor, but when When the lessee encounters operating difficulties or has a funding gap, the value of its equity will be reduced or even have no value, and it will be difficult to realize the equity and make up for the lessor's losses.

As a relatively stable property with clear ownership, real estate is one of the more common properties used for security and is also the most reliable security property. However, there are also certain problems in practice. The author has encountered the following: Situations: (1) In order to make the lessor believe that the value of the real estate is sufficient to secure the creditor's rights of the financial lease project, the lessee may provide an appraisal report with a higher valuation result as a voucher to gain the lessor's trust and achieve the purpose of financing. There is no shortage of There are cases where lessees collude with appraisal companies to inflate appraisal results.

Since the lessor does not have professional knowledge of valuation and cannot well understand and predict the changes in house prices in the area where the mortgaged real estate is located, it is difficult to find problems and can only rely on the conclusions of the valuation report. This can only be done when a dispute occurs. It is found that the value of the mortgaged real estate may be far lower than the debt that the lessee should bear; (2) Some real estate has been leased to a third party before the mortgage, and the third party has also taken actual possession of the real estate. When disposing of the real estate, it may be Uncooperation or even deliberate obstruction of the disposal process makes it difficult to dispose of the real estate; (3) If the real estate cannot be realized through auction and the creditor's rights can only be realized by paying off the debt in kind, the lessor may need to pay the legal tenant's renovation compensation before disposing of the real estate. , and it is necessary to advance taxes on behalf of the mortgagor to complete the transfer and obtain the ownership of the real estate. Especially the taxes on commercial and industrial land are very high, which adds a huge burden to the lessor whose debts have been unable to be paid off. In addition, some places have limited purchase policies for real estate. If multiple real estate properties are subject to debt-for-deposit at the same time, there is uncertainty as to whether the lessor will be able to accept the debt-for-deposit real estate.

II. Suggestions on legal risk prevention

1 Before signing a financial lease contract

1. Establish a complete project review mechanism to check the lessee’s basic information, credit Conduct detailed investigation and evaluation on the legality and feasibility of the project, capabilities, liabilities and the proposed financing project itself, and make prudent decisions to reduce risks caused by bad projects or bad lessees.

2. Strengthen the review of the authenticity of the materials provided by the lessee, such as by querying the invoice code, interviewing the lessee’s managers or partners, requiring the lessee to issue relevant commitments, etc., to ensure as much as possible Authenticity of materials.

3. Ensure that the financial leasing contract meets the legal requirements, and at the same time, based on the problems reflected in existing projects and cases, continuously add and improve the terms and content of the main contract and supporting contract text to ensure that the contract can be relied upon when disputes arise. The text safeguards the interests of creditors to the greatest extent possible.

4. Strengthen the agreement on security measures. For example, if there is a pledge of charging rights in the project, it is recommended to take effective measures to strengthen the monitoring of charging rights to ensure that the pledge of charging rights can be smoothly realized. Taking the right to charge electricity charges as an example, while establishing a pledge of charging rights, the pledger can be required to provide a written commitment issued by the pledger and the actual power purchaser or by signing a tripartite agreement with the lessee (pledger) and the power purchaser. way to reduce the risk of being unable to monitor electricity bill revenue - the main contents of the written commitment or tripartite agreement should at least include: (1) The power purchaser is aware of the existence of the lessor's right to charge electricity bills and knows that the electricity bill revenue should be paid to the designated Supervise accounts and the lessor’s right of priority to be reimbursed in accordance with the law; (2) The power purchaser will abide by the power purchase contract with the power seller (i.e. the lessee) and fully perform its power purchase obligations; (3) The power purchaser guarantees Transfer the electricity charges payable to the electricity seller's supervision account opened at the designated bank; (4) When the lessee fails to pay off its debts, the electricity charges payable shall be transferred directly to the account designated by the lessor according to the lessor's notice; ( 5) If the power purchaser violates the promise or agreement, he shall bear certain liability for breach of contract, etc.

2 During the performance of the financial lease contract

1. Strengthen the supervision of the leased property and establish a complete tracking mechanism for the leased property to ensure that the leased property exists and the lessor always enjoys the financial lease project Ownership of all leased items

You can consider the following methods: directly participate in all aspects of the purchase and receipt of leased items in direct leasing projects to ensure that the leased items are purchased, received and actually put into use in a timely manner ; In a sale-leaseback project, ensure that the leased property actually exists, that the lessee has the right to dispose of the leased property, and promptly handles the registration procedures for the change of ownership of the leased property (if necessary) to ensure that the ownership of the leased property is transferred to the lessor.

2. Take effective measures to clearly indicate the ownership of the leased property and reduce the risk of the leased property being acquired in good faith by a third party.

Consider marking the leased property in obvious places and requiring the lessee to The leased property is mortgaged to the lessor and mortgage registration, remote camera monitoring, and GPS positioning are set up in accordance with the law to ensure that the lessor can effectively grasp the situation of the leased property during the project operation, making it more difficult for the lessee to dispose of the leased property without authorization, and reducing the risk of unauthorized disposal of the leased property. The risk of the lessor losing ownership of the leased property.

3. Improve the post-lease management mechanism and adopt on-site inspections to promptly and intuitively understand, verify and provide feedback on the status of lessees, guarantors and leased properties/collaterals

Leasing projects are generally mid- to long-term projects, so it is very important to grasp the status of the project and the lessee in a timely manner. Good post-lease management can effectively warn of risks, improve the quality of leased assets, and ensure the safety of leased assets. The lessor may conduct on-site inspections of the lessee on a regular or irregular basis, focusing on the lessee's operating and financial conditions, the use of the leased property, the guarantor's operating and financial conditions, and the conditions of the mortgage and pledged property. , and record the contents of the inspection and the conditions discovered during the inspection in detail and properly retain them, signed by the inspector (preferably the inspected party can also sign and seal), and finally summarize and analyze the inspection situation. This can not only promptly evaluate whether the lessee has committed a breach of contract or the possibility of breach of contract, but also preserve favorable evidence for possible disputes in the future.

3. Remedial measures after the risk occurs

1 Communicate with the lessee and guarantor as soon as possible and send written documents to assert rights

When it is discovered that the lessee is in default of payment In order to avoid the expansion of losses after rent or possible rent arrears, the lessor should communicate with the lessee as soon as possible to confirm the actual situation and subsequent payment plan, and decide on subsequent actions based on the actual situation. While communicating, it is recommended to send a written document (a company reminder letter or a lawyer's letter, etc., and be careful to keep the proof of sending and delivery) to the lessee and guarantor to formally claim the realization of the creditor's rights, remind and warn the lessee, and also serve as a reminder in the future. The basis for claiming rights.

2 Comprehensively collect favorable evidence and information

After the lessee breaches the contract, whether the breach is due to temporary insufficient funds or a long-term capital chain break, the lessor shall Make full preparations, organize and analyze materials related to the project, and continue to collect evidence and information that is beneficial to you in the later communication with the lessee and guarantor, and be ready to file a lawsuit at any time.

3 Determine the litigation claims

Financial lease projects usually use a format contract provided by the lessor. The contract sometimes stipulates that when the lessee breaches the contract, the lessor has the right to require the lessee to immediately pay all Rent and terminate the contract and take back the leased property. However, according to Article 10, Paragraph 1 of the "Interpretations of the Supreme People's Court on Applicable Legal Issues in the Trial of Financial Lease Contract Dispute Cases" (amended in 2020), "the lessor not only requests the payment of all unpaid rent stipulated in the contract but also requests the termination of the financial lease contract. , the People's Court shall inform it to make a choice in accordance with the provisions of Article 752 [7] of the Civil Code." When the lessor files a lawsuit, it must "terminate the contract and take back the leased property" and "request the lessee to Choose one of the options "people pay all the rent". Therefore, the lessor needs to comprehensively weigh the pros and cons of the two options of "terminating the contract and taking back the leased property" and "requiring the lessee to pay the full rent", and choose the option that is most conducive to the realization of rights.

4 Determine the judicial authority with jurisdiction

Financial lease contracts usually stipulate that the competent court is the people’s court of the lessor’s domicile. Therefore, after the litigation claims are determined, the court can be based on the litigation. The subject amount of the request shall determine the corresponding jurisdiction court.

5 File a lawsuit in a timely manner and apply for property preservation

Most financial lease dispute cases are caused by the lessee's financial difficulties and the inability to pay the rent. Therefore, before the lessor files a lawsuit, the lessee has already defaulted on rent payments, and the lessee may have other debts or even have property preservation measures taken due to other cases. Therefore, in order to ensure to the greatest extent that the judgment documents obtained by the lessor after taking judicial procedures are enforceable, it is necessary to promptly take judicial procedures and apply for property preservation, and take necessary measures to seal up and freeze the properties of the leased property, the lessee and the guarantor, and First in order. However, when applying for preservation, you should carefully provide preservation clues, measure risks, and avoid applying for preservation by mistake.

6 Once it is discovered that the leased property/collateral has been subject to preservation or enforcement measures due to other cases, effective legal means should be taken promptly to remedy the situation

1. If the lessor discovers that the leased property has been damaged due to other If a case is wrongly preserved, the following remedies can be taken depending on the stage of preservation:

(1) If the leased property is seized or frozen by other creditors during the pre-litigation or preservation stage of the case , it can be done in accordance with Article 111 of the Civil Procedure Law[8] and Article 172 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China[9] ], you can safeguard your rights by applying for reconsideration;

(2) If the leased property is wrongly executed during the execution stage of the case, you can, based on the actual situation, in accordance with Article 1 of the "Civil Procedure Law" According to the provisions of Articles 232[10] and 234[11], you can safeguard your rights by submitting written objections to the court.

2. If the lessor discovers that preservation or enforcement measures have been taken against the collateral due to other cases, it can take relief in the following ways:

(1) Through the execution of the lessor’s case The judge coordinates the first court to transfer the mortgage to the lessor and the execution court for disposal;

(2) Apply to the first court to receive priority payment for the property obtained from the disposal of the mortgage[12].

The above is the legal risks that need to be paid attention to in financial leasing projects and their prevention and relief suggestions that the author has summarized based on the relevant theories of financial leasing and actual cases of relevant financial leasing projects. , hoping to provide some valuable ideas and suggestions to industry stakeholders.