Circular Regarding Enforcement Document Extracts for Registered Financial Lease Contracts

Saudi Central Bank Number: 42039135 Date: 1442/06/12 Attachments: None

Circular

Dear Sirs/Madams, Peace, mercy, and blessings of God be upon you,

Subject: Controls and Procedures for Enforcement Document Extracts for Registered Financial Lease Contracts.

Based on the powers vested in the Saudi Central Bank by virtue of the Financial Lease Law issued by Royal Decree No. (M/48) dated 1433/8/13 AH, and based on paragraph (2) of Article Twenty-Five of the Executive Regulations of the Financial Lease Law issued by His Excellency the Governor's Decision No. (1/M.Sh.T) dated 1434/4/14 AH, and amended by His Excellency the Governor's Decision No. (93/M.Sh.T) dated 1441/10/18 AH, which states: "The enforcement document extract for a registered financial lease contract shall be considered an enforcement document, in accordance with paragraph eight of Article Nine of the Enforcement Law, and shall signify commitment." And as a result of the fruitful cooperation between the Saudi Central Bank and the Ministry of Justice in all matters serving the public interest, including those related to financial lease contracts, and in a desire to regulate the procedures for requesting and issuing enforcement document extracts for registered financial lease contracts issued by financial lease contract registration companies licensed by the Saudi Central Bank.

Enclosed herewith is a copy of the controls and procedures for requesting and issuing enforcement document extracts for registered financial lease contracts. The Saudi Central Bank emphasizes to lessors and financial lease contract registration companies the strict adherence to what is stated in these controls and procedures, in addition to the applicable laws, controls, and instructions issued by relevant authorities. The lessor and the contract registration company shall not be exempted in case of non-compliance. Please note that these controls supersede the controls for the lessor's recovery of movable assets in financial lease contracts issued by the Saudi Central Bank under Circular No. 9926/99 dated 1441/2/16 AH.

For your information and action.

Best regards,

Fahad bin Ibrahim Al-Shathri Deputy Governor for Supervision

Distribution Scope:

• Banks and financial institutions operating in the Kingdom.
• Finance companies operating in the Kingdom.
• Financial lease contract registration companies licensed by the Saudi Central Bank.

P.O. Box 2992 Riyadh 11169 Kingdom of Saudi Arabia Tel: +966 11 463 3000

Controls and Procedures for Requesting and Issuing Enforcement Document Extracts for Registered Financial Lease Contracts

Jumada al-Akhirah 1442 AH / January 2021 AD

The Saudi Central Bank issued these controls based on the powers vested in it by virtue of the Financial Lease Law issued by Royal Decree No. (M/48) dated 1433/8/13 AH.

Saudi Central Bank

Table of Contents

Part	Page Number
Chapter One: Definitions and General Provisions	3
Chapter Two: Procedures for Requesting and Issuing Enforcement Document Extracts for the Recovery of Movable Assets	3
Chapter Three: Procedures for Requesting and Issuing Enforcement Document Extracts for Requesting Delivery of Immovable Assets	5
Chapter Four: Procedures for Requesting and Issuing Enforcement Document Extracts for Financial Enforcement Certificates	6
Chapter Five: Concluding Provisions	7
Chapter Six: Effectiveness	8

Chapter One: Definitions and General Provisions

Article One: Definitions 1- The words and phrases contained in these controls and procedures shall have the meanings assigned to them in the Financial Lease Law and its Executive Regulations. 2- For the purpose of applying the provisions of these controls and procedures: the following words and phrases – wherever they appear in these controls and procedures – shall have the meanings indicated opposite each of them, unless the context requires otherwise: Recovery of Movable Assets: The recovery of movable assets from the lessee in cases where the financial lease contract between the two parties includes the lessor's right to recover them. Request for Delivery of Immovable Asset: The lessor's request for the delivery of the immovable asset (the property subject to the financial lease contract) from the lessee in cases where the financial lease contract between the two parties includes the lessor's right to recover it. Financial Enforcement Certificate: A certificate issued by contract registration companies at the request of the lessor, including a demand for the lessee to pay a specific amount to the lessor in the cases stipulated in these controls and procedures. Specialized Companies: Companies specialized in the recovery of movable assets licensed by the Ministry of Justice in accordance with the Enforcement Law. These can be viewed on the Ministry of Justice's website. Parties: The lessor, the lessee, contract registration companies, specialized companies, and the competent judicial authority. Ministry: Ministry of Justice. Documented Communication: A recorded means of communication that can be verified and retrieved in written or electronic form. Enforcement Document Extract for a Registered Financial Lease Contract (Enforcement Document Extract): A document issued by contract registration companies for enforcement on the leased asset (movable and immovable) in accordance with the provisions of the Enforcement Law and its Executive Regulations, and includes the enforcement document extract for the recovery of movable assets, the enforcement document extract for requesting delivery of immovable assets, and the enforcement document extract for a financial enforcement certificate.

Article Two: For the issuance of an enforcement document extract, the contract must be registered with contract registration companies.

Article Three: All parties must use electronic means in the process of requesting and issuing the enforcement document extract.

Chapter Two: Procedures for Requesting and Issuing Enforcement Document Extracts for the Recovery of Movable Assets

Article Four: The lessor is prohibited from recovering movable assets, except through specialized companies.

Article Five: The mechanism for recovering movable assets shall be in accordance with the controls for the lessor's receipt of movable assets issued by the Ministry of Justice.

Article Six: The lessor may apply to the contract registration company for the issuance of an enforcement document extract for the recovery of movable assets in the following cases: 1- The lessee's failure to pay the agreed-upon monthly installments in the finance contract for three consecutive months, or more than five separate months throughout the contract period, after the lessor has completed the following steps:

1. Notifying the lessee through documented communication of the obligation to pay the overdue installments, otherwise the lessor has the right to recover the movable asset.
2. The application to the contract registration company must be submitted fifteen days after the notification to the lessee mentioned in paragraph (1) above. 2- Expiration of the contract, and the lessee's failure to acquire ownership of the movable asset or return it to the lessor, after the following has been verified:
3. Expiration of the contract term.
4. Impossibility of transferring ownership of the movable asset to the lessee.

Article Seven: The contract registration company, after receiving the lessor's request for the issuance of an enforcement document extract for the recovery of movable assets and verifying the lessor's entitlement, shall carry out the following procedures: 1- Issuing the enforcement document extract including the contract number and date, place of payment, place of issuance, date of extract, lessor's name, lessee's name, amount due, and current installments. 2- Notifying one of the specialized companies – chosen by the lessor – of the lessee's violation of the contract terms and the lessor's desire to recover the movable asset, with providing it with all movable asset data according to the form approved by the contract registration company.

Article Eight: The contract registration company shall provide the Ministry monthly with a statement including all lessor requests related to the issuance of an enforcement document extract for the recovery of movable assets, along with a statement of the specialized companies to which these requests were referred.

Article Nine: The lessor must directly notify the lessee of the recovery of the movable asset through documented communication, on condition that the communication text includes at least the following:

1. Lessor's name and the entity responsible for collecting overdue payments.
2. Contact number for the relevant department and/or third party.
3. Working hours of the relevant department and/or third party.
4. Employee's name and lessor's name and/or third party in case of telephone communication.

Article Ten: The lessor must provide the lessee with the approved form for the movable asset inventory report as stated in the controls for the lessor's receipt of movable assets issued by the Ministry of Justice through documented communication related to the financial lease contract.

Article Eleven: The lessor must not dispose of the movable asset (on سبيل المثال لا الحصر: بيع الأصل أو التنازل عنه لطرف آخر أو إقفال العقد) before the expiry of a period of (15) fifteen days from the date of asset recovery, and must notify the lessee of the amounts due and the necessary documents for delivering the movable asset.

Article Twelve: Except for the cases mentioned in Article Six of these controls and procedures, the lessor may apply to the competent court to request the termination of the contract and the recovery of the movable asset in financial lease contracts.

Chapter Three: Procedures for Requesting and Issuing Enforcement Document Extracts for Requesting Delivery of Immovable Assets

Article Thirteen: The lessor may apply to the contract registration company for the issuance of an enforcement document extract for requesting delivery of immovable assets in financial lease contracts in the following cases: A. The lessee's failure to pay the agreed-upon monthly installments in the finance contract for three consecutive months, or more than five separate months for a period of seven (7) working days or more for each installment from its due date for every (5) five years of the contract term, after the lessor has completed the following steps: 1- Notifying the lessee through documented communication of the obligation to pay the overdue installments, otherwise the lessor may apply for the delivery of the immovable asset. The default notification must include the following information: (data on overdue installments, how to correct and remedy the default, the period granted to the lessee to correct the default before initiating procedures for requesting delivery of the immovable asset, which shall not be less than (10) ten working days from the date the lessee receives the notification). This notification shall be sent in accordance with the "Notifications" article in the contract. 2- The application to the contract registration company must be submitted after failing to reach an agreement with the lessee to pay the overdue installments, or after the lessee submits a request for early ownership of the immovable asset.

B. Expiration of the contract, and the lessee's failure to acquire ownership of the immovable asset or return it to the lessor, after the following has been verified:

1. Expiration of the contract term.
2. The lessee's failure to transfer ownership of the immovable asset to himself within the period agreed upon with the lessor.
3. Impossibility of signing a handover report for the immovable asset to the lessor.

Article Fourteen: The contract registration company, after receiving the lessor's request for the issuance of an enforcement document extract for requesting delivery of the immovable asset and verifying the lessor's entitlement, shall carry out the following procedures:

1. Obtaining an acknowledgment from the lessor of their right to request delivery of the immovable asset from the lessee, after ensuring that the finance contract permits this, and the lessor attaching all supporting documents for the request.
2. In individual real estate finance contracts, notifying support programs in the Ministry of Housing (if any) of the lessor's desire to have the immovable asset delivered from the lessee and providing them with all required data according to the form approved by the contract registration company, in order to consider the possibility of the lessee (individual) meeting the approved support criteria in the Ministry (if any).
3. In the absence of support programs in the Ministry of Housing, or if the lessee (individual) does not meet the approved support criteria in the Ministry, the contract registration company shall issue the enforcement document extract for requesting delivery of the immovable asset and deliver it to the lessor, including the contract number and date, place of payment, place of issuance, date of extract, lessor's name, lessee's name, amount due, current installments, and data of the immovable asset's title deed.

Article Fifteen: The lessor may submit the enforcement document extract for requesting delivery of the immovable asset to the entity concerned with vacating and delivering the immovable asset, and complete what is necessary according to the applicable regulations in this regard.

Article Sixteen: Except for the cases mentioned in Article (Thirteen) of these controls and procedures, the lessor may directly apply to the competent court to issue a judgment for the delivery of the immovable asset, and this includes financial lease contracts concluded before the effectiveness of the Financial Lease Law.

Chapter Four: Procedures for Requesting and Issuing Enforcement Document Extracts for Financial Enforcement Certificates

Article Seventeen: The lessor may apply to the contract registration company for the issuance of an enforcement document extract for a financial enforcement certificate in the following cases:

A. The lessee's failure to pay any of the monthly installments agreed upon in the finance contract. The extract shall be issued for the value of the overdue installments only. B. Compensating the lessor for each day of delay in case of the expiration of the financial lease contract, and the lessee's delay in returning the movable asset or completing ownership procedures, after the following has been verified: 1- The contract between the two parties stipulates the lessor's right to oblige the lessee to compensate them for each day of delay in returning the movable asset after the contract expires. 2- The lessor's compensation shall be the payment of the daily rental value of the movable asset according to the contract using the following formula: ((value of the last due rental installment / number of days in the month in which the contract was terminated) * number of days of delay = rental value. C. Cost of recovering the movable asset, in cases where the lessor has the right to recover it, after the following has been verified: 1- The recovery of the movable asset must have occurred through one of the cases stipulated in Article (Six) of these controls and procedures. 2- The cost must be based on approved invoices issued by contract registration companies and specialized companies.

Article Eighteen: The contract registration company, after receiving the lessor's request for the issuance of an enforcement document extract for a financial enforcement certificate and verifying the lessor's entitlement, shall issue the enforcement document extract for a financial enforcement certificate including the contract number and date, place of payment, place of issuance, date of extract, lessor's name, lessee's name, amount due, and current installments.

Chapter Five: Concluding Provisions

Article Nineteen: The contract registration company must record and preserve all requests received from lessors related to requests for issuing enforcement document extracts, and their outcomes, in an organized manner.

Article Twenty: The lessor must develop its internal policies and procedures to align with these controls and procedures, and in a manner that does not conflict with applicable laws and instructions.

Article Twenty-One: The lessor and the contract registration company must strictly adhere to what is stated in these controls and procedures, in addition to the applicable laws, controls, and instructions issued by relevant authorities. The lessor and the contract registration company shall not be exempted in case of non-compliance.

Article Twenty-Two: These controls and procedures are subject to update and amendment when needed.

Article Twenty-Three: These controls and procedures supersede the controls for the lessor's recovery of movable assets in financial lease contracts issued by the Saudi Central Bank under Circular No. 9926/99 dated 1441/2/16 AH.

Chapter Six: Effectiveness

Article Twenty-Four: These controls and procedures shall be effective from their date of issuance.