WILLIAM DONALD SCHAEFER, Governor

S.B. 147

security, and (b) an agreement that upon compliance with the terms of the lease the
lessee shall become or has the option to become the owner of the property for no
additional consideration or for a nominal consideration does make the lease one intended
for security.]

(A) WHETHER A TRANSACTION CREATES A LEASE OR SECURITY INTEREST IS
DETERMINED BY THE FACTS OF EACH CASE; HOWEVER, A TRANSACTION CREATES A
SECURITY INTEREST IF THE CONSIDERATION THE LESSEE IS TO PAY THE LESSOR
FOR THE RIGHT TO POSSESSION AND USE OF THE GOODS IS AN OBLIGATION FOR
THE TERM OF THE LEASE NOT SUBJECT TO TERMINATION BY THE LESSEE, AND:

(A)     (I) THE ORIGINAL TERM OF THE LEASE IS EQUAL TO OR GREATER
THAN THE REMAINING ECONOMIC LIFE OF THE GOODS;

(B)     (II) THE LESSEE IS BOUND TO RENEW THE LEASE FOR THE
REMAINING ECONOMIC LIFE OF THE GOODS OR IS BOUND TO BECOME THE OWNER
OF THE GOODS;

(C) (III) THE LESSEE HAS AN OPTION TO RENEW THE LEASE FOR THE
REMAINING ECONOMIC LIFE OF THE GOODS FOR NO ADDITIONAL CONSIDERATION
OR NOMINAL ADDITIONAL CONSIDERATION UPON COMPLIANCE WITH THE LEASE
AGREEMENT; OR

(D) (IV) THE LESSEE HAS AN OPTION TO BECOME THE OWNER OF THE
GOODS FOR NO ADDITIONAL CONSIDERATION OR NOMINAL ADDITIONAL
CONSIDERATION UPON COMPLIANCE WITH THE LEASE AGREEMENT.

(B) A TRANSACTION DOES NOT CREATE A SECURITY INTEREST MERELY
BECAUSE IT PROVIDES THAT:

(A) (I) THE PRESENT VALUE OF THE CONSIDERATION THE LESSEE IS
OBLIGATED TO PAY THE LESSOR FOR THE RIGHT TO POSSESSION AND USE OF THE
GOODS IS SUBSTANTIALLY EQUAL TO OR IS GREATER THAN THE FAIR MARKET
VALUE OF THE GOODS AT THE TIME THE LEASE IS ENTERED INTO;

(B) (II) THE LESSEE ASSUMES RISK OF LOSS OF THE GOODS OR
AGREES TO PAY TAXES, INSURANCE, FILING, RECORDING, OR REGISTRATION FEES,
OR SERVICE OR MAINTENANCE COSTS WITH RESPECT TO THE GOODS;

(C) (III) THE LESSEE HAS AN OPTION TO RENEW THE LEASE OR TO
BECOME THE OWNER OF THE GOODS;

(D) (IV) THE LESSEE HAS AN OPTION TO RENEW THE LEASE FOR A
FIXED RENT THAT IS EQUAL TO OR GREATER THAN THE REASONABLY
PREDICTABLE FAIR MARKET RENT FOR THE USE OF THE GOODS FOR THE TERM OF
THE RENEWAL AT THE TIME THE OPTION IS TO BE PERFORMED; OR

(E) (V) THE LESSEE HAS AN OPTION TO BECOME THE OWNER OF THE
GOODS FOR A FIXED PRICE THAT IS EQUAL TO OR GREATER THAN THE
REASONABLY PREDICTABLE FAIR MARKET VALUE OF THE GOODS AT THE TIME THE
OPTION IS TO BE PERFORMED.

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