Sale and Leaseback Law and Legal Definition

Sale and leaseback is an arrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller. This arrangement allows the initial buyer to have full use of the asset without tying up money in the property. Tax benefits sometimes apply to these transactions.

Advantages

* Negates the need to raise potentially more expensive capital in the marketplace to finance expansion etc.
* Leasing normally represents 100% financing whereas a mortgage company will not provide more than say two-thirds of the value of a project.

Disadvantages

* Lessee acts much as the owner of the property rather than as a tenant paying for all repairs, maintenance, insurance and property taxes during the currency of the lease.
* Improvements to the property and any increase in land value inure to the benefit of the landlord at the expiration of the lease.