# Insolvency of the Lessee

Source: https://www.mtrlegal.com/en/insolvency-of-the-lessee/ · Language: en · Updated: 2025-08-30

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## Legal claims of the lessor

Machines or vehicles are often leased by companies. If the company is required to file for insolvency, the lessor then faces the question of what legal claims he has and how the insolvency affects the leasing relationship.

For creditors and also for lessors, the insolvency of a customer or business partner always represents a financial risk. In the event of the lessee’s insolvency, however, the lessor is not without protection and may have claims for restitution or damages. It is important to have a detailed contract structure to ensure a clear legal position, according to the commercial law firm MTR Legal Rechtsanwälte, which advises, among other things, on leasing law.

When concluding a leasing contract, the lessor usually remains the owner of the leased asset. In return for payment of a leasing fee, he allows the lessee to use an asset, e.g. a car or a machine. Various rights of the lessor can be asserted in the event of the lessee’s insolvency due to his position as the owner.

## Insolvency administrator has the final say

Insolvency does not necessarily mean the end of the leasing relationship. After insolvency proceedings are opened against the lessee, an insolvency administrator initially takes control. This person decides whether the leasing relationship will be continued or terminated. They have the right of choice according to § 103 of the Insolvency Code (InsO).

If the insolvency administrator wishes to continue the leasing contract, the leasing payments must continue to be made regularly from the opening of proceedings. These payments are then considered so-called estate liabilities and take priority. If the leasing contract is not to be continued, the insolvency administrator stops payments. In this case, the lessor can demand the return of the leased object.

## Rights of the lessor in case of non-fulfillment of the contract

If the insolvency administrator decides not to continue the insolvency application, the lessor has various rights:

**Claim for restitution under §**** 47 InsO: **Since, in civil law, the lessor remains the owner of the leased asset, he has what is known as a segregation claim. That means: He can demand from the insolvency administrator the return of the leased object. However, this only applies if the leasing contract does not include a special acquisition right for the lessee at the end of the lease (e.g., in the case of full amortization with purchase option). Such a right could be considered economic ownership.**Claim for damages: **If the contract is not continued, the lessor can usually claim damages, e.g., for lost profit or for leasing payments that are omitted due to the premature termination of the contract. However, this claim only qualifies as an insolvency claim and, like all other creditor claims, is only settled proportionally from the insolvency estate.

## Special features for different types of leasing

Depending on whether the leasing contract includes an option to acquire for the lessee, differences may arise in the legal assessment: In operating leasing, meaning a short-term lease without purchase interest, the lessor clearly remains the owner of the leased asset and retains full risk. Segregation from the insolvency estate is generally possible without issue. The right to segregation should be asserted early after the opening of insolvency proceedings.

In financial leasing with an obligation or option to purchase at the end of the term, however, the insolvency court or administrator may argue that the asset should be attributed to the economic ownership of the lessee. In this case, the lessor’s claim for restitution could be called into question.

Lessors should therefore ensure at contract conclusion that the retention of title is clearly regulated and that there is no economic transfer of ownership to the lessee.

## Careful contract drafting

If the lessee becomes insolvent, the lessor is therefore not without rights. In many cases, as the owner, he can demand the return of the leased object. What is decisive is how the insolvency administrator evaluates the contractual relationship and whether the object is to be attributed to the lessee under civil or economic law.

To avoid legal disputes, careful contract drafting is extremely important. This can minimize the lessor’s risk in the event of insolvency. Nevertheless, insolvency proceedings remain a situation with financial risks for all parties involved. Therefore, early security measures and legal assistance are strongly recommended in such cases.

MTR Legal Rechtsanwälte advises in cases of insolvency as well as on further topics related to [leasing law](https://www.mtrlegal.com/offices/deutschland/leasingrecht/).

Please feel free to [contact](https://www.mtrlegal.com/kontakt/) us!