N.Y. UCC Law § 1-203 — New York Code / Act UCC / Article 1 / Part 2 / Section 1-203
Lease Distinguished From Security Interest
Status: in_force

Section 1--203. Lease Distinguished From Security Interest.\n  (a) Whether a transaction in the form of a lease creates a lease or\nsecurity interest is determined by the facts of each case.\n  (b) A transaction in the form of a lease creates a security interest\nif the consideration that the lessee is to pay the lessor for the right\nto possession and use of the goods is an obligation for the term of the\nlease and is not subject to termination by the lessee, and:\n  (1) the original term of the lease is equal to or greater than the\nremaining economic life of the goods;\n  (2) the lessee is bound to renew the lease for the remaining economic\nlife of the goods or is bound to become the owner of the goods;\n  (3) the lessee has an option to renew the lease for the remaining\neconomic life of the goods for no additional consideration or for\nnominal additional consideration upon compliance with the lease\nagreement; or\n  (4) the lessee has an option to become the owner of the goods for no\nadditional consideration or for nominal additional consideration upon\ncompliance with the lease agreement.\n  (c) A transaction in the form of a lease does not create a security\ninterest merely because:\n  (1) the present value of the consideration the lessee is obligated to\npay the lessor for the right to possession and use of the goods is\nsubstantially equal to or is greater than the fair market value of the\ngoods at the time the lease is entered into;\n  (2) the lessee assumes risk of loss of the goods;\n  (3) the lessee agrees to pay, with respect to the goods, taxes,\ninsurance, filing, recording, or registration fees, or service or\nmaintenance costs;\n  (4) the lessee has an option to renew the lease or to become the owner\nof the goods;\n  (5) the lessee has an option to renew the lease for a fixed rent that\nis equal to or greater than the reasonably predictable fair market rent\nfor the use of the goods for the term of the renewal at the time the\noption is to be performed; or\n  (6) the lessee has an option to become the owner of the goods for a\nfixed price that is equal to or greater than the reasonably predictable\nfair market value of the goods at the time the option is to be\nperformed.\n  (d) Additional consideration is nominal if it is less than the\nlessee's reasonably predictable cost of performing under the lease\nagreement if the option is not exercised. Additional consideration is\nnot nominal if:\n  (1) when the option to renew the lease is granted to the lessee, the\nrent is stated to be the fair market rent for the use of the goods for\nthe term of the renewal determined at the time the option is to be\nperformed; or\n  (2) when the option to become the owner of the goods is granted to the\nlessee, the price is stated to be the fair market value of the goods\ndetermined at the time the option is to be performed.\n  (e) The "remaining economic life of the goods" and "reasonably\npredictable" fair market rent, fair market value, or cost of performing\nunder the lease agreement must be determined with reference to the facts\nand circumstances at the time the transaction is entered into.\n