We know today that rental vehicles of all kinds are becoming increasingly common in the daily lives of drivers, obviously due to the conveniences they offer. Let’s look today at some useful legal information regarding leasing contracts to understand how the daily discussions are not always complete or correct, especially when these rumors concern important areas, such as the insurance of the rented vehicle and the driver’s liability in the event of an accident.

1.What exactly is the meaning of a leasing contract?

The leasing contract, the concept of which most people know in practice, has the following content: the lessor rents to the lessee a movable or immovable thing, and the lessee has the usual obligations just as in a classic lease of property, which we have mentioned in another of our texts. What few know is that immovable property can also be rented with leasing, in the exact same way and with the same content as renting a movable property.

At the same time, the lessee acquires the right from the lessor to purchase the item they are already renting at a later time. Whether the price at which the item will be offered for purchase will be the market price or if the rents already paid by the lessee will be offset is a matter for agreement between the two parties. However, in no case can the right to purchase the vehicle at a future time be excluded; if there is such a term in the leasing contract, then it will be invalid.

As for the burdens and expenses of the rented vehicle (which we will refer to in this text), these primarily burden the lessor, who grants use to the lessee. In other words, the lessee is not obliged to pay road taxes, income/luxury taxes related to the vehicle, the premiums owed by the lessor to the insurance company, etc. It is another matter, of course, whether the vehicle’s premiums have already been included in the rental price, in which case the amount of the latter will obviously be increased for the lessee.

2.What (legal) duration can the contract have?

Regarding the duration of the leasing contract, especially when we talk about vehicle rental, the law stipulates that the minimum duration that can be agreed upon is 3 years. If the two parties agree on a shorter period, then the contract will be valid for 3 years, as this arises from a mandatory provision of the law. In any case, it is important to know that the duration of the contract must be definite, and therefore there cannot be an indefinite leasing contract.

On the other hand, if one of the parties wishes to terminate the contract early, since the contract is for a definite period, there arises an issue with the future rent owed and the possible compensation of the other party. Obviously, the first consideration is the terms of the contract that the parties studied and agreed upon; however, if nothing specific is stated there, then in order to terminate the contract, a significant reason must be present, as we will see below.

If there is no significant reason and nonetheless one party terminates the contract, then they may be obliged to compensate the other party for the damage it suffered due to the early termination of the contract, provided that it reasonably believed that the contract would continue until its expiration. This is why various clauses in contracts stating that the remaining rents will be demanded by the lessor in the event of early termination of the contract are often valid, as they cover a form of compensation that would primarily be owed by the lessee to the lessor of the vehicle.

3.What are my obligations when renting a car?

Regarding the obligations of the renter, the law has made specific references to prevent new practical problems and thus disagreements between lessors and lessees. Specifically, the lessee is obliged to:

• Maintain the vehicle in good condition, taking care of both hygiene inside it and mechanical inspections whenever necessary.
• Notify the company (usually the lessor) when the vehicle shows signs of malfunction so that it can guide them in addressing the issue.
• Visit the service centers indicated by the rental company for vehicle repairs, something that is usually stated as a clause in the rental agreements.
• Return the vehicle to the rental company when the rental period expires, as delays may incur additional rent payments as compensation for usage.
• Comply with all obligations imposed on them by the Highway Code as a driver, as they will also be personally liable in the event of an accident, as we will see below.
• Declare the rental of the car when filing their tax return, since it is an asset they are using as a driver.
• Answer truthfully to any questions that the company may pose before renting the car, even through a questionnaire, so that the company knows whether and under what terms they will rent the vehicle to them.

4.What happens if I am involved in a traffic accident?

Given that rental vehicles frequently circulate on the roads today and considering the frequent changes to the Highway Code, traffic accidents (unfortunately) occur often. Many wonder whether the insurance company will compensate the third party who was the victim of the accident. We must state the following: The insurance company of the driver who caused the traffic accident always compensates the third-party victim, regardless of whether the latter bore any fault in causing the accident (the issue of the amount of compensation is another matter if they also caused the accident).

At the same time, the law stipulates that the victim of the traffic accident who suffered material (and moral) damages cannot pursue the car rental company to cover the damages they incurred. This is because the company grants the vehicle to a driver, who has the responsibility for proper driving. Furthermore, if every traffic victim from a rental vehicle could pursue the rental company, the companies would quickly face financial ruin due to the excessive compensations they would be required to pay.

Based on the above, the victim of the traffic accident can only pursue the driver of the vehicle as well as the person who signed as the lessee in the rental document from the rental company (in the case that the vehicle was granted without the right to another driver apart from the lessee). Whether the rental company will cover the amount that the lessee will be required to pay the traffic victim depends on the terms of the lease, which usually contain several exceptions to coverage, many of which resemble those found in insurance contracts.

5.Are there tax advantages to renting a vehicle through leasing?

One characteristic of the leasing contract is that it also offers tax benefits to drivers, encouraging them to prefer it over other options for acquiring a vehicle. For example, if the retail price of the vehicle is up to €14,000, the renter will only have to pay an additional tax of 4% for that tax year, while for an owned vehicle, the tax due to ownership would be significantly higher.

Another important advantage of renting through leasing is that if the vehicle is leased for business purposes, the rent paid by the company for the vehicle rental counts as a gross expense that falls within the tax-exempt category. However, for this to occur, the vehicle must now be in the Euro 5 or Euro 6 emissions class, meaning it must emit low to zero pollutants, and its value must not exceed €17,000.

In addition to the above, if the lessee later wishes to purchase the item, the price they will be required to pay to the lessor will not be subject to tax, and especially in the case of purchasing real estate, no transfer taxes, such as Property Transfer Tax, will be owed. Naturally, the heirs of the lessee (if they die during the term of the contract) can continue the operation of the contract as long as they assume their obligations—covering the owed rents or the agreed price for purchasing the vehicle if such an agreement was made between the lessor and lessee.

6.What are the typical elements required for the contract to function?

In order for the leasing contract between lessor and lessee to be valid and operate according to the law, certain necessary elements must be met. More specifically, the contract must be established in writing—since the law does not differentiate, it can be a private document; thus, a notarial document is not necessarily required except in the case of the transfer of real estate to the lessee if the latter intends to purchase it from the former lessor in the future.

Moreover, the leasing contract and the document in which it is recorded must be registered in a special book maintained at the Athens Court of First Instance. However, this process has evolved today, and registration is now done electronically, usually by the leasing company, so that the lessee does not have to deal with bureaucratic procedures. It is important to note that only after the registration of the contract in this special book does the contract take effect against third parties—if a third party rents the vehicle before the contract is registered, they can also claim it from the lessor, even if a previous lease had been established.

Additionally, it is crucial to understand that the provisions regarding possession do not apply in a leasing contract—the lessee cannot acquire ownership of the vehicle simply by using it for a long period due to possession. Another consequence of the above is that the company can reclaim the vehicle immediately once the contract expires, and if it was established with a notarial document, the leasing company does not even need to resort to the courts and can immediately request the return of the vehicle from the lessee.

7.Under what conditions can I later purchase the vehicle that I have been renting until now?

One significant reason why many people are aware of vehicle rental through leasing is the opportunity provided to the lessee to purchase the vehicle they have rented from the leasing company at a future date. As mentioned earlier, the law states that any agreement/clause from the company stating that the lessee will not be able to purchase the vehicle later is invalid and will not apply to the agreement signed by the parties.

Additionally, regarding the rents paid while the lessee was renting the vehicle, it can be agreed between the parties that upon purchasing the vehicle, the final price will be reduced due to the calculation of the rents paid by the lessee. However, since such an agreement is not mandated by law but is instead left to the discretion of the parties, caution is needed, as there may be a term in the lease that prohibits the calculation of rents in the final purchase price of the vehicle—the lessee may ultimately purchase the vehicle at the market price as if they had not rented it from the company.

Furthermore, concerning the material condition of the vehicle and the properties it must have, what we mentioned in a previous question regarding the rights of the lessee applies. Specifically, the lessee can refuse to accept the vehicle upon purchase if they find that it has developed a defect over time for which they are not responsible. The issue is whether, upon purchasing the vehicle, the (now buyer and no longer lessee) will receive a new vehicle and not the one they had been renting for a long time. Some companies offer this as an option; however, caution is needed regarding the purchase price and the specifications agreed upon by the parties to avoid disagreements and legal disputes.

8.When can the leasing contract be terminated?

The law recognizes certain reasons that, if they occur, lead to the automatic termination of the leasing contract for the future—no action is needed from the parties to terminate the contract. Specifically, the leasing contract is terminated:

• When the lessee is declared bankrupt—this includes a relevant court decision or even a court decision that does not declare bankruptcy due to the inability to cover even the initial costs for the bankruptcy process.
• When the specified duration of the contract has elapsed. It is important to note that there cannot be an implied extension for an indefinite period of the contract unless the parties have explicitly agreed to such an arrangement.
• When, for any reason, the vehicle is destroyed, rendered completely inoperable, stolen by another party, etc. Other reasons that may arise in practice are obviously included.
• When the vehicle cannot be used for legal reasons—when it is rented to another person, when it is seized from the lessee by a creditor of the company, etc.
• When the lessee purchases the vehicle, at which point, since they are now the owner of the vehicle, there is no point in keeping the leasing contract in effect.
• When the lessee or the leasing company terminates the contract early, i.e., before its expiration, provided that there is a reason justifying the early termination of the contract, which does not need to be specified in the contract terms.
• When the vehicle is completely useless for the lessee because it has such defects or lacks the properties agreed upon with the company, allowing the lessee to refuse to accept it and instead request compensation.

9.The vehicle I was renting developed a fault.Who is responsible for the repair?

In this common situation that arises in practice, where the vehicle received by the lessee presents some mechanical issue either from the start or during the contract, the answer regarding the rights of the lessee varies depending on the situation. ISpecifically, if the problem appeared from the beginning, the lessee can initially refuse to accept the vehicle until the lessor rectifies the defect, with the costs borne by the latter. Additionally, the lessee may request another vehicle of the same category, especially if they have prepaid rents for the defective vehicle they were to receive.

If the vehicle developed a problem during the contract, it is important whether the damage is usual or rare. This distinction matters because leasing companies typically cover the mechanical maintenance of the vehicles at their own expense, provided it concerns the usual wear and tear that a vehicle undergoes over time (e.g., oil changes, fluid replacements, tire changes, etc.). Conversely, if the issue that arose is rare, it must be distinguished whether it was caused by the fault of the lessee or the leasing company.

If the defect appeared in the vehicle due to the lessee’s fault (e.g., because they caused it through inappropriate driving or failed to notify the company for regular servicing of the vehicle), then the lessee will be liable to the company for compensation for the defect. This compensation is usually offset against the outstanding rents, which the company increases at the lessee’s expense. On the other hand, if the problem appeared due to the fault of the company (e.g., because the company did not maintain the vehicle properly or did not inform the lessee about the defect), then the lessee is not liable for compensation and can exercise the rights mentioned above.

10. I rented a vehicle through leasing along with others.How will we share the rent?

It is not uncommon for multiple parties to choose to rent a vehicle together, typically if they are part of a company and wish to reduce the cost of renting the vehicle. To have a clear understanding of the legal implications, it is crucial to state that:

• The agreement made by the lessees with the lessor regarding the payment of the rent is of great importance—who will be responsible to the lessor for the rent, and thus against whom the lessor can act if the payment is not made.
• If there is no such agreement, then all lessees are liable to the lessor for the payment of the rent—the lessor can pursue any one of the lessees for the full amount without needing to follow a specific order.
• If the lease is made in the name of the company, the type of company is important. If it is a general partnership, then the lessor can again demand payment of the rent from each general partner on behalf of the company.
•  If the company is a capital company (i.e., a public limited company, limited liability company, or private limited company), then, in principle, the partners will not be liable for the payment of the rent; however, if one partner refuses to pay, the other partners can file a lawsuit in the name of the company against the defaulting partner for the share they owe regarding the rent.
• If one of the multiple renters pays a larger portion of the rent than their share, they may pursue a claim against the others to recover the excess amount paid.
• If the lessor releases one of the lessees from the obligation to pay rent (e.g., agrees to debt forgiveness), then, in principle, the other lessees cannot invoke this agreement unless it was explicitly made to apply to them as well.