RIYADH — The Saudi Central Bank (SAMA) has underscored the importance of ensuring that reports, issued by appraisal firms licensed by the Saudi Authority for Accredited Valuers (Taqeem), shall be verified when determining whether leased vehicles damaged in accidents and classified as a total economic loss fall within the scope of this requirement.
In a recent circular, seen by Okaz newspaper, sent by SAMA to all banks, financial institutions, and finance companies operating in the Kingdom, it emphasized that, upon being notified of damage to a leased asset, the financing entity must take all appropriate measures and exercise due diligence in coordination with all relevant parties to ensure the lessee’s continued ability to use the leased vehicle before it is classified as a total economic loss.
The Central Bank noted that the circular forms part of its ongoing efforts to monitor and address the challenges encountered by clients of financial institutions. The Central Bank clarified that, for the purposes of implementing Article 22 of the Financial Leasing Law, reports issued by appraisal firms licensed by the Taqeem must be verified.
The article stipulates that the contract shall be terminated if the leased asset is totally destroyed. If the leased asset is partially destroyed to the extent that it can no longer be used, and the lessor does not, within a reasonable period, restore the leased asset to its original condition or replace it with a similar asset acceptable to the lessee, the lessee may terminate the contract or agree with the lessor to continue the contract and adjust the rent to reflect the partial destruction of the asset. If the contract continues in its existing form, no rent shall be payable for the repair period unless the lessor compensates the lessee during that period with another asset of value no less than that of the leased asset.”
The article further stipulates that if the competent authorities issue a decision preventing the full use of the leased asset for reasons not attributable to the lessee, the lease contract shall be terminated and rent shall be waived from the date the restriction takes effect. The regulations shall define the entitlements of each party upon the termination or cancellation of the contract during the lease term in a manner that ensures fairness between the parties in accordance with Shariah principles, while taking into account any insurance compensation that may be due.
Source: Saudi Gazette