Leases

Question 1

General Rule About Leases

Answer 1

Article 9 DOES NOT apply to true leases

Article 9 WILL APPLY if the lease is actually a disguised secured transaction

Question 2

Bright Line Test

Answer 2

(1) “Lessee” obligated to pay FULL OBLIGATION under lease; AND
(2a) Original term of lease = remaining economic life of the goods; or
(2b) Lessee BOUND TO RENEW lease fo remaining economic life of the goods; or
(2c) Lessee has OPTION TO RENEW lease for remaining economic life for nominal consideration; or
(2d) Lessee has OPTION TO BECOME OWNER of goods for no or nominal additional consideration

Question 3

What Happens if Bright Line Test is Met?

Answer 3

Article 9 will govern

Secured party will need to file or otherwise perfect their interest in the goods