2023 New York Laws › UCC - Uniform Commercial Code › Article 1 › Part 2 - General Definitions and Principles of Interpretation › 1-203 - Lease Distinguished From Security Interest.

Section 1--203. Lease Distinguished From Security Interest.
(a)  Whether  a  transaction in the form of a lease creates a lease or
security interest is determined by the facts of each case.
(b) A transaction in the form of a lease creates a  security  interest
if  the consideration that 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 and is not subject to termination by the lessee, and:
(1)  the  original  term  of the lease is equal to or greater than the
remaining economic life of the goods;
(2) 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;
(3)  the  lessee  has  an  option to renew the lease for the remaining
economic life of the  goods  for  no  additional  consideration  or  for
nominal   additional   consideration  upon  compliance  with  the  lease
agreement; or
(4) the lessee has an option to become the owner of the goods  for  no
additional  consideration  or  for nominal additional consideration upon
compliance with the lease agreement.
(c) A transaction in the form of a lease does not  create  a  security
interest merely because:
(1)  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;
(2) the lessee assumes risk of loss of the goods;
(3) the lessee agrees to  pay,  with  respect  to  the  goods,  taxes,
insurance,  filing,  recording,  or  registration  fees,  or  service or
maintenance costs;
(4) the lessee has an option to renew the lease or to become the owner
of the goods;
(5) 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
(6)  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.
(d) Additional consideration  is  nominal  if  it  is  less  than  the
lessee's  reasonably  predictable  cost  of  performing  under the lease
agreement if the option is not exercised.  Additional  consideration  is
not nominal if:
(1)  when  the option to renew the lease is granted to the lessee, the
rent is stated to be the fair market rent for the use of the  goods  for
the  term  of  the  renewal  determined  at the time the option is to be
performed; or
(2) when the option to become the owner of the goods is granted to the
lessee, the price is stated to be the fair market  value  of  the  goods
determined at the time the option is to be performed.
(e)  The  "remaining  economic  life  of  the  goods"  and "reasonably
predictable" fair market rent, fair market value, or cost of  performing
under the lease agreement must be determined with reference to the facts
and circumstances at the time the transaction is entered into.