Posted in Finance, Accounting and Economics Terms, Total Reads: 244
Definition: Sandwich Lease
Sandwich lease is a lease in which the a party or a person takes the property or a piece of land on rent from the original owner of that property or piece of land and then subsequently rents it to another third party. Such type of lease activity is known as sandwich lease. So, in this case the main party who started this activity acts as both lessor as well as lessee. Lessee in case of the primary owner of the property from whom he took the property on rent and lessor for the third party to whom he subsequently leases again after borrowing.
So, the primary party is responsible for both payment of rent to lessor as well as collection of rent from lessee. Since, the primary party lies in between the primary owner of the property and the third party user, hence the name given is sandwich lease. However, such kind of activity on any property can only be performed after taking permission from the primary owner of that property. Such kind of lease is done when the primary party leases a property for a very long time from its original owner or is unable to completely utilize the property. In these kind of situation generally the primary party, wants to have a purchase option at the end of the lease period.
During the time of sandwich lease they generally tend to find a tenure who wants to buy the property at the end of lease period. In this way, the tenant also gets time to secure enough amount of money for buying that property while currently using it. It is basically a strategy that is being used by a large number of real estate investors to increase their portfolio of properties to increase monthly cash flow.