[Direct answer]In the Beijing area, whether the lessor can reclaim the equipment in the event of a lessee's breach of contract (such as non-payment of rent) in financial leasing depends on the contractual provisions and legal procedures. According to Article 752 of the Civil Code of the People's Republic of China, the lessee shall pay the rent in accordance with the contract; if the lessee fails to pay the rent within a reasonable period after being reminded, the lessor may request the payment of the full rent or rescind the contract and reclaim the leased object. However, the reclamation must be carried out through legal means. The lessor may not trespass, forcibly seize, or damage the equipment without authorization, otherwise it may constitute infringement. In practice, it is usually first to issue a reminder, then to rescind the contract in accordance with the contract and the law, and finally to apply for reclamation after confirmation through litigation or arbitration. It is recommended that the lessor review the provisions on rescission and reclamation in the financial leasing contract, claim in accordance with legal procedures, and avoid self-help remedies that may lead to compensation. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

1. Problem background and typical scenarios

Financial leasing is widely used in fields such as equipment procurement, vehicles, and medical devices. Typical default scenarios include: the lessee failing to pay rent for several consecutive periods due to operational difficulties; unauthorized subleasing, mortgaging, or transferring the leased asset; and the loss of control of the leased asset due to bankruptcy. Many lessors mistakenly believe that "the equipment is mine, so I can just take it back if they default on the rent", but they ignore the legal procedure of terminating the contract to retrieve the equipment. If the equipment is forcibly retrieved without terminating the contract, it may be considered an infringement, and the lessor may even need to compensate the lessee for losses. Such disputes involve both contract law and property law, and the pace of handling them directly affects the value of the equipment and the recovery of creditor's rights. The relevant enforcement and repayment can be combined withCreditor-debtor relations and enforcement case servicesAdvance.

II. Key points of contention

There are three key points of contention. Firstly, the right of rescission and the right of reclamation: Article 752 of the Civil Code grants the lessor the right to rescind the contract and reclaim the leased object after giving notice, but this must first be done in accordance with the law or the contract. Secondly, the legality of the reclamation method: unauthorized forcible reclamation is often deemed infringement and should be carried out through judicial procedures or with the cooperation of the lessee. Thirdly, value liquidation and compensation for over- or under-payment: after reclamation, the value of the leased object shall be offset against the arrears in rent and the breach of contract penalty. If the value is insufficient, the lessee may still seek compensation. For issues involving the ownership and registration of equipment, reference can be made to relevant provisions.Real estate sales and construction project servicesClarify the boundaries of rights.

III. Professional analysis by Henglue Lawyers

In handling various disputes over the validity and remedies of contracts, Henglue Law Firm has accumulated solid experience. Taking an arbitration case of contract invalidity handled by our firm as an example: Party Wang * hoped to obtain a purchase quota for policy-based housing in a certain area of Beijing, and signed a "Consulting Service Contract" with a certain company and paid a service fee of 2 million yuan. It was agreed that the receipt of the purchase eligibility notice would be deemed as performance of the contract. Subsequently, Wang * verified with the housing and construction department through the 12345 hotline that the so-called purchase quota documents were forged and did not exist in reality. The company only refunded 800,000 yuan and refused to refund the remaining 1.2 million yuan, and promptly initiated arbitration to claim breach of contract damages. Wang * entrusted our lawyers to file a counterclaim, arguing that the contract was named as consulting but in fact involved reselling purchase quotas, which violated the regulatory policies and should be deemed invalid. The arbitration tribunal ruled that the contract was invalid, and ordered the company to fully refund the remaining 1.2 million yuan in service fees and dismissed its arbitration request. This case highlights that, in the face of the other party's breach of contract or disputes over the validity of the contract, the party in compliance should organize evidence around the essence of the contract and policy basis, and choose the right path to assert rights. This case was handled by Beijing Henglue Law Firm.Zhao ChunxiaoThe attorney (practice certificate number: 11101202111351131, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

The core basis is Article 735 (Definition of Financial Leasing Contract), Article 752 (Rent Payment and Rescission and Recovery), Article 753 (Remedies for Lessee's Unauthorized Disposition of Leased Assets), and Article 758 (Termination of Contract and Return of Value) of the Civil Code of the People's Republic of China (effective January 1, 2021). If the lessor encounters a breach of contract, it shall first send a written notice and grant a reasonable period of time; if the lessee still fails to pay within the time limit, the lessor may rescind the contract in accordance with the contract or the law, and apply for recovery after confirmation through litigation or arbitration; when recovering the equipment, the lessor shall evaluate its value and deduct the arrears to avoid excessive possession. Practical suggestions: When signing the contract, clarify the breach of contract circumstances, rescission conditions, and recovery procedures; after the lessee defaults on the rent, prioritize sending a notice to urge payment and, if necessary, seek recovery through legal means. For contract review, it can be combined with the following aspects:Special services and other case servicesEvaluation.

5. Henglue Law Firm's Reminder

Retrieving the leased items is not a private act of "doing it yourself", but a statutory procedure of "first terminating the contract and then retrieving the items". The lessor should keep the evidence of unpaid rent, reminders, and breach of contract, and terminate the contract and retrieve the items through legal means in accordance with the contract and Article 752 of the Civil Code. It is strictly prohibited to forcibly remove the equipment, otherwise, it may lead to the lessor becoming an infringer. If the lessee encounters illegal retrieval, he/she should fix the evidence, demand the return of the items, and claim compensation. Both parties should pay attention to the statute of limitations and the burden of proof. If there are complex ownership disputes, it is advisable to seek legal assistance as soon as possible.Beijing Henglu Law FirmAfter the intervention of professional forces, the creditor's rights and property rights will be balanced in accordance with the law.

VI. Frequently Asked Questions

Q1: If the lessee defaults on the rent, can I, as the lessor, directly retrieve the equipment?

It's very risky to forcibly reclaim the leased item directly. According to Article 752 of the Civil Code, if the lessee still fails to pay the rent after being urged, the lessor may terminate the contract and reclaim the leased item, but the reclamation must be based on the contract being terminated in accordance with the law or the contract terms. If the lessor forcibly enters, occupies, or removes the equipment without terminating the contract, it will likely be considered infringement, and the lessor may be liable for damages to the lessee. A safer approach is to first send a written notice to the lessee, document the evidence of the unpaid rent, then terminate the financial leasing relationship in accordance with the contract and the law, and apply for reclamation after confirmation through litigation or arbitration. Whether the leased item can be "reclaimed" depends on the legality of the procedures and the contract terms. It's crucial not to use illegal means to counteract breaches of contract.

Q2: If there's a breach of contract in financial leasing and the lessor wants to reclaim the asset, what evidence do I need to prepare?

The core evidence includes: the financial leasing contract and the equipment purchase invoice (proving ownership and contractual obligations), the rent payment ledger and overdue payment vouchers (proving breach of contract), the reminder letter and delivery records (proving that the reminder obligation has been fulfilled), the current status of the leased asset and location evidence (proving that the lessee still possesses the asset), as well as the contractual provisions regarding termination and repossession. The evidence should be organized around the "fact of rent arrears - reminder has been sent - termination conditions have been met - repossession is legal". The more complete the materials are, the smoother the termination and repossession will proceed. It is recommended to simultaneously fix the value of the equipment for evaluation, in preparation for subsequent deductions and recovery of damages.

Q3: How much will it cost in attorney's fees and litigation expenses to retrieve the leased property and file a lawsuit?

The litigation fees shall be calculated in accordance with the "Measures for the Payment of Litigation Fees", based on the amount of the litigation request (such as unpaid rent, breach of contract penalties, etc.) and accumulated in stages. The losing party shall bear the fees. For property cases, the higher the subject matter value, the lower the fee rate will be. Lawyer's fees shall be determined based on the complexity of the case, the subject matter value, and the lawyer's qualifications, and shall be charged on a per-case, hourly, or percentage-of-the-subject-matter basis, subject to the terms of the entrustment contract. There is no unified government pricing for these fees. It is recommended to first calculate the difference between the unpaid rent and the value of the equipment, and compare it with the litigation fees and lawyer's fees to assess the cost-benefit ratio. For financing disputes with large subject matter values, it is advisable to entrust professional legal services in corporate and contract disputes to handle them, so as to improve the efficiency of recovery and compensation.

Q4: How long does it usually take to resolve disputes over the recovery of equipment in financial leasing?

The timeframe depends on the procedures and the specific circumstances of the case. For ordinary first-instance procedures, the trial is generally completed within six months, and for summary procedures, it is completed within three months. For cases involving rent arrears where the facts are clear and the contractual terms are well-defined, summary procedures are often more suitable, with a shorter timeframe. If the parties appeal, the second-instance trial is generally completed within three months. After the judgment or ruling takes effect, if the equipment needs to be recovered, it is necessary to apply for enforcement, and the enforcement cycle depends on the equipment's investigation and control and the lessee's cooperation. Overall, simple cases may take several months from filing the lawsuit to recovering the equipment, while complex cases may take more than a year. It is recommended to apply for property preservation simultaneously during the litigation to lock the equipment and prevent its transfer.

Q5: If the lessee breaches the contract, what should I, as the lessor, do first?

Here's the translation of the Chinese (Simplified) sentence into English, with a detailed explanation: Suggested four steps: 1. Review the financial leasing contract and the rent ledger to confirm the number of overdue installments, the amount owed, and the contract termination clauses; 2. Send a written notice to the lessee, clarifying the reasonable performance period and the consequences of default, and retain the delivery receipt; 3. If the lessee still fails to pay after the deadline, terminate the contract in accordance with the agreement or the law, and confirm the termination and repossession through litigation or arbitration; 4. After obtaining judicial confirmation, apply to repossess the equipment, evaluate its value to offset the outstanding debt, and continue to recover the remaining amount. Throughout the process, avoid forcible repossession. If collection is necessary, it should be carried out legally through court enforcement procedures, and a lawyer should be engaged if necessary.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication opinions in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limit. →Business and commercial legal services·Attorney Zhao Chunxiao·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.