A sale and leaseback is an arrangement where a party sells a property to another party and immediately leases it back, making the seller the lessee and purchaser the lessor. This transaction may occur if the seller is experiencing cash flow or financing problems or sees tax advantages, and allows the seller to avoid executory costs like repairs, insurance, and taxes while maintaining use of the property. Key is recognizing the sale and lease as separate transactions, even though the asset does not physically transfer hands.

6. Sale and leaseback
-is an arrangement whereby one
party sells a property to another
party and then immediately leases
the property back from its new
owner

7. Thus, the seller becomes a seller-
lessee and the purchaser, a
purchaser-lessor .
A sale and leaseback transaction may
occur when the seller-lessee is
experiencing cash flow or financing
problem or because there are tax
advantages in such an arrangement in
the lessee’s jurisdiction.

8. Moreover, the seller-lessee would like
to avoid the burden of paying the executory costs
attendant to the asset,
such as repairs, insurance and taxes.
The important consideration in a sale and
leaseback transaction is the recognition of two
separate and distinct transactions. However, it is
important to note that there is no physical transfer
of asset.
First, there is a sale of property and there is a
lease agreement for the same property in which
the seller is the lessee and the buyer is the lessor.