17 July 1989 Ruling 58341 F - Lease of Aircraft

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

July 17, 1989

19(1)

Re:  Opinion No. 5-8105, dated June 23, 1989 (the "Opinion Letter")

This is in reply to your letter dated June 30, 1989, in which you advised us of an error in the statement of facts set out in the Opinion Letter.

You have advised that the wording of paragraph 14(C) of the Opinion Letter should read as follows:

     "gives the lessor the right to insist on the correction of mechanical or like deficiencies prior to funding if such were evident to the lessor prior to funding.  As a practical matter, the custom in the industry is for the lessor not to involve itself in looking for mechanical or other like deficiencies and instead rely upon the lessee to advise that the aircraft are satisfactory"

While the lessor has the right to insist on the correction of mechanical deficiencies, we understand that the lessor does not have the right to refuse to provide funds due to a mechanical deficiency in a specific aircraft delivered to the lessor.  As indicated to you in our telephone conversation of July 11, 1989, the amended wording set out above does not alter the opinion expressed in the Opinion Letter.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate