70A-9a-407 - Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest.
70A-9a-407. Restrictions on creation or enforcement of security interest inleasehold interest or in lessor's residual interest.
(1) Except as otherwise provided in Subsection (2), a term in a lease agreement isineffective to the extent that it:
(a) prohibits, restricts, or requires the consent of a party to the lease to the assignment ortransfer of, or the creation, attachment, perfection, or enforcement of a security interest in, aninterest of a party under the lease contract or in the lessor's residual interest in the goods; or
(b) provides that the assignment or transfer or the creation, attachment, perfection, orenforcement of the security interest may give rise to a default, breach, right of recoupment, claim,defense, termination, right of termination, or remedy under the lease.
(2) Except as otherwise provided in Subsection 70A-2a-303(7), a term described inSubsection (1)(b) is effective to the extent that there is:
(a) a transfer by the lessee of the lessee's right of possession or use of the goods inviolation of the term; or
(b) a delegation of a material performance of either party to the lease contract in violationof the term.
(3) The creation, attachment, perfection, or enforcement of a security interest in thelessor's interest under the lease contract or the lessor's residual interest in the goods is not atransfer that materially impairs the lessee's prospect of obtaining return performance or materiallychanges the duty of or materially increases the burden or risk imposed on the lessee within thepurview of Subsection 70A-2a-303(4) unless, and then only to the extent that, enforcementactually results in a delegation of material performance of the lessor.
Enacted by Chapter 252, 2000 General Session