Finance Leasing Manual - FLM1.08

Leasing of real property

The real property example at FLM1.08 above may be unexpected but accountants apply the same criteria whatever the nature of the asset. Normally, any single letting of a building is not designed to achieve simply a banking turn for the landlord (the lessor). Landlords take big risks and aim for an equity turn. In a boom they may do very well but, in a recession, they may be unable to find tenants, while their interest and maintenance charges still have to be met. But it is possible for real property leases to be structured on finance lease terms and a number of important deals have proceeded on this basis, including the leasing schemes targeted by Schedule 12 FA 1997, see FLM6.01 onwards. Finance lease structures have been important for enterprise zone properties (where 100% capital allowances are available) including the massive Canary Wharf cases.