Sale and leaseback

A definition and explanation of sale and leaseback arrangements.

Sale and leaseback is used to describe an arrangement whereby an owner sells his/her interest in a property or piece of land for an agreed sum and takes back a lease on the property/land, either at a rack rent or at some other rent related to price-paid for a fixed period of time.

Put simply:

• A transfers or grants a major interest in land or property (sale)
• B grants a lease of A for a specified period of time (leaseback)

Sale and leaseback arrangements are frequently used in both residential and commercial sectors.

The advantages of such an arrangement is that it allows the seller to raise capital, which can then be used to invest in its business. For example, supermarkets and care homes have used their property portfolios to enter into sale and leaseback arrangements to raise capital to invest in their business activities while still being able to continue occupying the premises.