The concept can also be applied by national governments to territorial assets; prior to the Falklands War, the government of the United Kingdom proposed a leaseback arrangement whereby the Falklands Islands would be transferred to Argentina, with a 99-year leaseback period,[1] and a similar arrangement, also for 99 years, had been in place prior to the handover of Hong Kong to mainland China.
One reason for a leaseback is to transfer ownership to a holding company while keeping proper track of the ongoing worth and profitability of the asset.
Another reason is for the seller to raise money by offloading a valuable asset to a buyer who is presumably interested in making a long-term secured investment.
According to Robert Peston, one-time Business Editor for the BBC, one option being considered for dealing with the subprime mortgage crisis is a sale-and-leaseback of toxic assets.
The lease typically lasts for between 9 and 11 years, after which the management company has the option to either renew, or the property can be sold, or rented out and held privately by the owner.
In the United Kingdom, a form of leaseback known as sale and rent back was the subject of a 2014 Supreme Court case that found many such arrangements had been perpetrated fraudulently.
[3] A "sale/leaseback" or "sale and leaseback" is a transaction in which the owner of a property sells an asset, typically real estate,[4] and then leases it back from the buyer.
Due to the lack of financing available in today's market, many American businesses are increasingly turning to sale-and-leasebacks to provide quick capital.
Typically, if the original owner were to buy back the asset, it would take place at the end of the tax year, in case any party were to be audited by the IRS.
Airlines, for example, sell aircraft and engines to lessors, banks or other financial institutions who, in turn, lease the assets back to them.