Financial Leasing Agreement: A Comprehensive Examination of its Legal Nature, Types, Rights and Obligations of the Parties, and Supreme Court Case Law

Regarding the "Financial Leasing Agreement";

One of the most important growth dynamics of economic and commercial life is how businesses acquire the machinery, equipment, real estate, and high-cost fixed assets they need to sustain their operations and increase their capacity. Traditionally, such investments were financed either with equity or with high-interest cash loans from banks. However, in today's capital-intensive markets, it has become vital for businesses to maintain their profitability and manage their cash flow by "using" assets rather than "buying" them. This is where financial leasing (commonly known as leasing) agreements come into play.

Financial leasing is a special type of contract that enables investors to acquire modern means of production, machinery, real estate, and technological equipment without making large cash outflows. It is closely related to both finance and debt law. This study will examine the legal nature of financial leasing contracts, the regulations under Law No. 6361, their types, the rights and obligations of the parties, property disputes, and the guiding precedents of the Supreme Court. It will be presented in a simple, fluent, and clear language that is easily understandable to everyone, without compromising academic depth and conceptual consistency.

1. The Concept and Legal Nature of Financial Leasing

In Turkey, after being governed by fragmented legislation for many years, financial leasing activities have now been given a comprehensive legal basis with the enactment of Law No. 6361 on Financial Leasing, Factoring, Financing and Savings Finance Companies

In legal terms, a financial leasing agreement is a special type of contract in which the lessor (leasing company) transfers the possession of an asset, which it has purchased from a third party (seller) or otherwise obtained at the request and choice of the lessee, to the lessee for a specified period and in exchange for agreed-upon rental fees, with or without the option of transferring ownership to the lessee at the end of the contract.

The essential characteristics of a financial leasing agreement are as follows:

• Three-Party Relationship Structure: Unlike other ordinary rental agreements, a leasing transaction involves a three-party relationship: Seller (manufacturer or supplier of the goods), Lessor (leasing company/financial institution), and Lessee (the investing business).

• Separation of Ownership and Possession: While the legal ownership of the property belongs to the leasing company during the contract period , the lessee is the possessor who actually uses, operates, and bears the risks associated with the property .

• Financing Purpose: Leasing is fundamentally not a sale or simple rental of goods, but rather a financing and providing credit . The company provides financing by purchasing the goods upfront because the lessee lacks the funds, and then collects the payment in installments.

2. Types of Financial Leasing Agreements

In practice and within the financial sector, financial leasing transactions are divided into different models depending on the nature of the investment and the agreement between the parties:

A. Domestic Financial Leasing

This is the most common model where the goods are procured by the leasing financial company from a seller within Türkiye and delivered to the lessee.

B. International (Cross-Border) Financial Leasing

These are international transactions, particularly where high-tech machinery, aircraft, or massive industrial facilities are procured from foreign manufacturers and leased to a Turkish company. They are subject to specific regulations under customs and foreign exchange legislation.

C. Sale and Leaseback

This is a method frequently used by companies to ease cash flow, generate liquidity, or strengthen their balance sheet structures. A company sells a real estate property or machinery it owns to a leasing company, which then immediately leases the same asset back to the company under a financial lease agreement. At the end of the contract period, ownership usually reverts to the company for a symbolic price.

3. Formal Requirements and Registration Obligation of the Contract

Financial lease agreements, unlike ordinary written lease agreements, are subject to very strict formal and registration rules.

• Written Form Requirement: According to the law, financial leasing agreements be in writing to be valid (either notarized or written and signed with official certification). Agreements not in writing are legally invalid.

• Registration and Registry Record: It is mandatory to register the financial leasing annotation in the relevant special registries for assets subject to financial leasing (especially vehicles, ships, aircraft, or registered machinery). Furthermore, movable assets are registered in a special financial leasing registry maintained by the Union of Turkish Notaries. This registration is vital to ensure that third parties (e.g., other creditors of the lessee) know who owns the asset and to prevent them from making claims.

4. Rights and Obligations of the Parties

In financial leasing relationships, the rights and obligations of the parties are regulated in a balanced manner by Law No. 6361.

A. Rights and Obligations of the Lessor (Leasing Company)

• to Supply and Deliver Goods: The lessor company purchases the goods, which meet the specifications chosen and stated by the lessee, from the seller by paying the price and makes them available for the lessee's use. However, the lessor company is not held directly responsible for defective goods or late delivery; the lessee is obligated to exercise their right to sue the seller directly in this regard.

• Right to Protect Property: Since the property belongs to the lessor company, in the event of the lessee's bankruptcy or seizure of property due to debts, the lessor has the right to protect its property through legal action.

• Right to Collect Rent: The tenant has the right to demand timely and complete payment of the installments agreed upon in the contract.

B. Tenant's Rights and Obligations

• Rent Payment Obligation: The tenant is obligated to pay the periodic rent installments specified in the contract on time.

• Maintenance, Repair, and Insurance Obligation: The tenant, who has possession of the property, is obligated to use it carefully, carry out necessary maintenance and repairs, and insure it in the landlord's favor. The tenant bears the risk in case of fire, theft, or damage to the property.

• Termination Purchase Option: At the end of the contract, the party has the right (or priority right) to acquire ownership of the asset by paying a predetermined transfer price.

5. Tenant's Default and Termination of the Contract

In financial leasing agreements, the leasing company's right to intervene quickly and reclaim the asset in the event that the lessee fails to pay lease installments (defaults) is guaranteed by law.

• Notice and Deadline: If the tenant fails to pay the installments, the landlord sends a written notice through a notary public, giving the tenant a legal period (usually 30 days) to pay the outstanding debt. If the debt is not paid within this period, the landlord may terminate the contract.

• Return of Property and Eviction Through Enforcement: After the termination of the contract, the lessee is obliged to immediately return the property to the lessor. If the property is not returned, thanks to the special enforcement provisions allowed by financial leasing law, eviction proceedings without a court order and direct delivery of the property (delivery through seizure) can be initiated quickly.

6. Critical Solution Examples and Principle-Based Decisions in Light of Supreme Court Case Law

A. Ownership by the Lessor and Claims of Entitlement

According to the established jurisprudence of the Supreme Court of Appeals, if a financial leasing agreement has been made and registered in accordance with legal procedures, and if the leased machinery is among the assets seized due to the lessee's debts, the lessor company can directly a claim for ownership to have the seizure lifted. Third parties or enforcement offices cannot simply say, "The lessee has been using this equipment for a long time, therefore it belongs to them"; the registration of ownership always takes precedence.

B. Procedural Compliance with the Time Limits Given in the Notice of Termination

Supreme Court rulings emphasize that for a financial leasing agreement to be terminated, the notice must fully specify the legal deadlines. If the notice states a period shorter than the legal limits or if it was improperly served, the termination will not have legal effect; enforcement and eviction proceedings initiated by the lessor may be canceled on this ground.

C. Allegations of Collusion in Sale and Leaseback Agreements

In practice, some debtors, in order to evade seizures, arrange "sale-and-leaseback" agreements by falsely presenting a non-existent financial leasing relationship. According to Supreme Court precedents, when allegations of collusion (fraudulent transaction) are made in such cases, courts must meticulously investigate whether a genuine need for financing exists, whether the money was actually paid, and whether it is in accordance with market rates; fraudulent transactions that do not have a genuine financial purpose are not protected.

D. Compensation and Equity Calculated After Termination of the Contract

Supreme Court rulings have debated whether a lessor can claim the full amount of all future rental payments, including interest, if they rightfully terminate the contract. According to precedents, if the lessor reclaims the property early and sublet or sells it to someone else, it is essential to deduct the income from the remaining rental payments to prevent double enrichment and to calculate compensation fairly.

7. Legal Precautions to Consider When Drafting a Contract

To prevent parties from suffering losses and to avoid disputes being taken to court in financial leasing transactions, the following points should be considered:

1. Complete Specification of the Equipment: The technical specifications, brand, and model of the machine or device to be provided by the lessee must be clearly stated in the contract and the accompanying technical specifications.

2. Insurance Coverage Scope: The goods must be fully insured against fire, earthquake, theft, and accident risks from the transportation stage throughout the contract period, and the policy must be arranged in favor of the lessor.

3. Payment Plan Suitability to Cash Flow: Designing a realistic rent payment plan, taking into account the tenant's industry cycles (seasonal earnings, etc.), minimizes the risk of default.

Conclusion

Financial leasing agreements stand out as one of the most strategic financing tools in today's modern capital markets and investment ecosystem. While the heavy debt burden and high cash outflow requirements imposed by traditional credit mechanisms risk slowing down the growth and modernization efforts of businesses, the leasing institution eliminates this obstacle with its flexible structure that skillfully separates ownership from possession. The ability of the lessee – that is, the investor – to acquire high-tech machinery, industrial facilities, vehicles, or real estate for their business without tying up large amounts of capital plays a key role in accelerating economic activity and increasing competitiveness. The legal security provided by the lessor financial leasing company, which retains ownership, makes this financing model a reliable choice for both financiers and investors.

This process, firmly established by Law No. 6361, offers a highly disciplined legal framework with its written form requirements, mandatory registration, and rapid liquidation mechanisms in case of default. However, despite these strict rules, various disputes between the parties are inevitable in practice. At this point, the consistent and principled precedents of the Supreme Court serve as a vital compass in maintaining the balance of rights between the parties. From claims of ownership filed against third-party seizures due to the lessor's ownership, to the meticulous observance of mandatory legal deadlines in termination notices; from collusion checks in sale-and-leaseback transactions to the balancing of compensation calculated after contract termination according to principles of equity, each precedent plays a critical role in establishing legal certainty.

The parties' thorough definition of the goods' specifications at the start of the contract, the structuring of payment plans according to the business's actual cash flow, and the complete securing of insurance coverage are the most fundamental safeguards against future disputes. The lessee's adherence to their duty of care and the lessor's exercise of their legal rights within the framework of the principle of good faith directly affect the sustainability of the commercial relationship. In conclusion, when a financial leasing agreement is approached with a properly structured legal framework, a complete registration process, and a balanced management strategy guided by Supreme Court rulings, it serves as a solid bridge securing businesses' investments and makes a significant contribution to the uninterrupted and reliable functioning of the country's economic development mechanisms.