2985.7-2993
CIVIL CODE
SECTION 2985.7-2993
2985.7. (a) "Motor vehicle" means any vehicle required to be
registered under the Vehicle Code. Motor vehicle does not include any
trailer which is sold in conjunction with a vessel.
(b) "Lessor" includes "bailor" and is a person who is engaged in
the business of leasing, offering to lease or arranging the lease of
a motor vehicle under a lease contract.
For the purpose of this subdivision, "person" means an individual,
partnership, corporation, limited liability company, estate, trust,
cooperative, association or any other legal entity.
(c) "Lessee" includes "bailee" and is a natural person who leases,
offers to lease or is offered the lease of a motor vehicle under a
lease contract.
(d) "Lease contract" means any contract for or in contemplation of
the lease or bailment for the use of a motor vehicle, and the
purchase of services incidental thereto, by a natural person for a
term exceeding four months, primarily for personal, family or
household purposes, whether or not it is agreed that the lessee bear
the risk of the motor vehicle's depreciation. Lease contract does not
include a lease for agricultural, business or commercial purposes,
or to a government or governmental agency or instrumentality.
(e) "Regulation M" means any rule, regulation, or interpretation
promulgated by the Board of Governors of the Federal Reserve System
under the federal Consumer Leasing Act (15 U.S.C. Secs. 1667-1667e),
and any interpretation or approval issued by an official or employee
of the Federal Reserve System duly authorized by the board to issue
such interpretations or approvals.
(f) "Constant yield method" means the following:
(1) In the case of a periodic payment lease, the method of
determining the rent charge portion of each base payment in which the
rent charge for each computational period is earned in advance by
multiplying the constant rate implicit in the lease contract times
the balance subject to rent charge as it declines during the
scheduled lease term. At any time during the scheduled term of a
periodic payment lease, the balance subject to rent charge is the
difference between the adjusted capitalized cost and the sum of (A)
all depreciation and other amortized amounts accrued during the
preceding computational periods and (B) the first base periodic
payment.
(2) In the case of a single payment lease, the method of
determining the periodic earning of rent charges in which the rent
charge for each computational period is earned in advance by
multiplying the constant rate implicit in the lease contract times
the balance subject to rent charge as it increases during the
scheduled lease term. At any time during the scheduled term of a
single payment lease, the balance subject to rent charge is
determined by subtracting from the residual value the total rent
charge scheduled to be earned over the term of the lease contract and
adding to the difference all rent charges accrued during the
preceding computational periods.
(3) Periodic rent charge calculations are based on the assumption
that the lessor will receive the lease payments on their exact due
dates and that the lease does not end before its scheduled
termination date.
2985.71. (a) Any solicitation to enter into a lease contract that
includes any of the following items shall contain the disclosures
described in subdivision (b):
(1) The amount of any payment.
(2) A statement of any capitalized cost reduction or other payment
required prior to or at consummation or by delivery, if delivery
occurs after consummation.
(3) A statement that no capitalized cost reduction or other
payment is required prior to or at consummation or by delivery, if
delivery occurs after consummation.
(b) A solicitation to enter into a lease contract that includes
any item listed in subdivision (a) shall also clearly and
conspicuously state all of the following items:
(1) All of the disclosures prescribed by Regulation M set forth in
the manner required or permitted by Regulation M, whether or not
Regulation M applies to the transaction.
(2) The mileage limit after which mileage charges may accrue and
the charge per mile for mileage in excess of the stated mileage
limit.
(3) The statement "Plus tax and license" or a substantially
similar statement, if amounts due for use tax, license fees, and
registration fees are not included in the payments.
(c) No solicitation to aid, promote, or assist directly or
indirectly any lease contract may state that a specific lease of any
motor vehicle at specific amounts or terms is available unless the
lessor usually and customarily leases or will lease that motor
vehicle at those amounts or terms.
(d) A failure to comply with the provisions of this section shall
not affect the validity of the leasing contract. No owner or employee
of any entity, other than the lessor, that serves as a medium in
which a lease solicitation appears or through which a lease
solicitation is disseminated, shall be liable under this section.
2985.8. (a) Every lease contract shall be in writing and the print
portion of the contract shall be printed in at least 8-point type and
shall contain in a single document all of the agreements of the
lessor and lessee with respect to the obligations of each party.
(b) At the top of the lease contract, a title which contains the
words "LEASE CONTRACT" or "LEASE AGREEMENT" shall appear in at least
12-point boldface type.
(c) Every lease contract shall disclose all of the following:
(1) All of the information prescribed by Regulation M set forth in
the manner required or permitted by Regulation M, whether or not
Regulation M applies to the transaction.
(2) A separate statement labeled "Itemization of Gross Capitalized
Cost" that shall appear immediately following or directly adjacent
to the disclosures required to be segregated by Regulation M. The
Itemization of Gross Capitalized Cost shall include all of the
following and shall be circumscribed by a line:
(A) The agreed-upon value of the vehicle as equipped at the time
of signing the lease.
(B) The agreed-upon value and a description of each accessory and
item of optional equipment the lessor agrees to add to the vehicle
after signing the lease.
(C) The premium for each policy of insurance.
(D) The amount charged for each service contract.
(E) Any charge for an optional debt cancellation agreement.
(F) Any outstanding prior credit or lease balance.
(G) An itemization by type and agreed-upon value of each good or
service included in the gross capitalized cost other than those items
included in the disclosures required in subparagraphs (A) to (F),
inclusive.
(3) The vehicle identification number of the leased vehicle.
(4) A brief description of each vehicle or other property being
traded in and the agreed-upon value thereof if the amount due at the
time of signing the lease or upon delivery is paid in whole or in
part with a net trade-in allowance or the "Itemization of Gross
Capitalized Cost" includes any portion of the outstanding prior
credit or lease balance from the trade-in property.
(5) The fee, if any, to be retained by the lessor for document
preparation, which fee may not exceed forty-five dollars ($45) and
may not be represented as a governmental fee.
(6) The amount of any optional business partnership automation
program fee to register or transfer the vehicle, which shall be
labeled "Optional DMV Electronic Filing Fee."
(d) Every lease contract shall contain, in at least 8-point
boldface type, above the space provided for the lessee's signature
and circumscribed by a line, the following notice: "(1) Do not sign
this lease before you read it or if it contains any blank spaces to
be filled in; (2) You are entitled to a completely filled in copy of
this lease; (3) Warning--Unless a charge is included in this lease
for public liability or property damage insurance, payment for that
coverage is not provided by this lease."
(e) Every lease contract shall contain, in at least 8-point
boldface type, on the first page of the contract and circumscribed by
a line, the following notice:
"THERE IS NO COOLING OFF PERIOD
California law does not provide for a "cooling off" or other
cancellation period for vehicle leases. Therefore, you cannot later
cancel this lease simply because you change your mind, decided the
vehicle costs too much, or wish you had acquired a different vehicle.
You may cancel this lease only with the agreement of the lessor or
for legal cause, such as fraud."
(f) Every lease contract shall contain, in at least 8-point
boldface type, the following notice: "You have the right to return
the vehicle, and receive a refund of any payments made if the credit
application is not approved, unless nonapproval results from an
incomplete application or from incorrect information provided by you."
(g) The lease contract shall be signed by the lessor and lessee,
or their authorized representatives, and an exact copy of the fully
executed lease contract shall be provided to the lessee at the time
of signing.
(h) No motor vehicle shall be delivered under a lease contract
subject to this chapter until the lessor provides to the lessee a
fully executed copy of the lease contract.
(i) The lessor may not obtain the signature of the lessee to a
contract when it contains blank spaces to be filled in after it has
been signed.
(j) If the lease contract contains a provision that holds the
lessee liable for the difference between (1) the adjusted capitalized
cost disclosed in the lease contract reduced by the amounts
described in subparagraph (A) of paragraph (5) of subdivision (b) of
Section 2987 and (2) the settlement proceeds of the lessee's required
insurance and deductible in the event of theft or damage to the
vehicle that results in a total loss, the lease contract shall
contain the following notice in at least 8-point boldface type on the
first page of the contract:
"GAP LIABILITY NOTICE
In the event of theft or damage to the vehicle that results in a
total loss, there may be a GAP between the amount due upon early
termination and the proceeds of your insurance settlement and
deductible. THIS LEASE PROVIDES THAT YOU ARE LIABLE FOR THE GAP
AMOUNT. Optional coverage for the GAP amount may be offered for an
additional price."
2985.9. The following documents and agreements are not required to
be contained in a lease contract:
(a) An "express warranty," as that term is defined in paragraph
(1) of subdivision (a) of Section 1791.2, whether it relates to the
sale or lease of a consumer good.
(b) Titling and transfer documents utilized to register, title, or
transfer ownership of vehicles described in the lease contract with
government registration authorities.
(c) Insurance policies, service contracts, and optional debt
cancellation agreements.
(d) Documents that memorialize the sale or lease of goods or
services, relating to the leased vehicle, between the provider of
those goods or services and lessee that are included in the gross
capitalized cost of the lease and separately itemized in the
"Itemization of Gross Capitalized Cost."
2986.3. No lease contract shall contain any provision by which:
(a) A power of attorney is given to confess judgment in this
state, or an assignment of wages is given; provided that nothing
herein contained shall prohibit the giving of an assignment of wages
contained in a separate instrument pursuant to Section 300 of the
Labor Code.
(b) The lessee waives any right of action against the lessor or
holder of the contract or other person acting on his or her behalf
for any illegal act committed in the collection of payments under the
contract or in the repossession of the motor vehicle.
(c) The lessee relieves the lessor from liability for any legal
remedies which the lessee may have against the lessor under the
contract or any separate instruments executed in connection
therewith.
(d) The lessor or holder of the contract is given the right to
commence action on a contract under the provisions of this chapter in
a county other than the county in which the contract was in fact
signed by the lessee, the county in which the lessee resides at the
commencement of the action, the county in which the lessee resided at
the time the contract was entered into or in the county in which the
motor vehicle leased pursuant to such contract is permanently
garaged.
2986.4. Any acknowledgment by the lessee of delivery of a copy of a
lease contract or purchase order and any vehicle lease proposal and
any credit statement which the lessor has required or requested the
lessee to sign, and which the lessee has signed, during the contract
negotiations, shall be printed or written in size equal to at least
10-point bold type and, if contained in the contract, shall appear
directly above the space reserved for the lessee's signature. The
lessee's written acknowledgment, conforming to the requirements of
this section, of delivery of a completely filled in copy of the
contract, and a copy of such other documents shall be a rebuttable
presumption of delivery in any action or proceeding by or against a
third party without knowledge to the contrary when he or she acquired
his or her interest in the contract. If such third party furnishes
the lessee a copy of such documents, or a notice containing items set
forth in subdivision (c) of Section 2985.8, and stating that the
lessee shall notify such third party in writing within 30 days if he
or she was not furnished a copy of such documents, and no such
notification is given, it shall be conclusively presumed in favor of
such a third party that copies of the documents were furnished as
required by this chapter.
2986.5. (a) No person shall lease a used motor vehicle for
operation on California highways if such vehicle does not meet all of
the equipment requirements of Division 12 (commencing with Section
24000) of the Vehicle Code. This subdivision does not apply to an
extension or a subsequent lease of the same motor vehicle to the same
lessee.
(b) If a lessee of a vehicle pays to the lessor an amount for the
licensing or transfer of title of the vehicle which amount is in
excess of the actual fees due for such licensing or transfer, or
which amount is in excess of the amount which has been paid, prior to
the sale, by the lessor to the state in order to avoid penalties
that would have accrued because of late payment of such fees, the
lessor shall return such excess amount to the lessee, whether or not
such lessee requests the return of the excess amount.
2986.6. No agreement in connection with a lease contract which
provides for the inclusion of title to or a lien upon any personal or
real property, other than the motor vehicle which is the subject
matter of the lease contract, or accessories therefor, or special and
auxiliary equipment used in connection therewith, as security for
the payment of the contract obligations, shall be enforceable. This
section does not apply to a security deposit, advance payment of rent
or other cash prepayment.
2986.10. (a) An assignee of the lessor's rights is subject to all
equities and defenses of the lessee against the lessor,
notwithstanding an agreement to the contrary, but the assignee's
liability may not exceed the amount of the obligation owing to the
assignee at the time of the assignment.
(b) The assignee shall have recourse against the lessor to the
extent of any liability incurred by the assignee pursuant to this
section regardless of whether the assignment was with or without
recourse.
2986.12. It shall be unlawful for any lessor to induce or attempt
to induce any person to enter into a contract subject to this chapter
by offering a rebate, discount, commission or other consideration,
on the condition that the lessee gives information or assistance for
the purpose of enabling a lessor to either lease or sell a motor
vehicle to another.
2986.13. (a) Any payment made by a lessee to a lessor pending the
execution of a lease contract shall be refunded to the lessee in the
event the lease contract is not executed.
(b) In the event of breach by the lessor of a lease contract where
the lessee leaves his or her motor vehicle with the lessor as a
trade-in downpayment and the motor vehicle is not returned by the
lessor to the lessee for whatever reason, the lessee may recover from
the lessor either the fair market value of the motor vehicle left as
a downpayment or its value as stated in the lease contract,
whichever is greater. The recovery shall be tendered to the lessee
within five business days after the breach.
(c) The remedies of the buyer provided for in subdivision (b) are
nonexclusive and cumulative and shall not preclude the lessee from
pursuing any other remedy which he or she may have under any other
provision of law.
2987. (a) A lessee has the right to terminate a lease contract at
any time prior to the scheduled expiration date specified in the
lease contract. Except as provided in subdivision (f), all of the
following subdivisions of this section apply in the event of an early
termination.
(b) The lessee's liability shall not exceed the sum of the
following:
(1) All unpaid periodic lease payments that have accrued up to the
date of termination.
(2) All other amounts due and unpaid by the lessee under the lease
contract, other than excess wear and mileage charges and unpaid
periodic lease payments.
(3) Any charges, however denominated, that the lessor or holder of
the lease contract may assess in connection with termination not to
exceed in the aggregate the amount of a reasonable disposition fee,
if any, disclosed in the lease contract and assessed upon termination
of the lease contract.
(4) In the event of the lessee's default, reasonable fees paid by
the lessor or holder for reconditioning of the leased vehicle and
reasonable and necessary fees paid by the lessor or holder, if any,
in connection with the repossession and storage of the leased
vehicle.
(5) The difference, if any, between the adjusted capitalized cost
disclosed in the lease contract and the sum of (A) all depreciation
and other amortized amounts accrued through the date of early
termination, calculated in accordance with the constant yield or
other generally accepted actuarial method, and (B) the realized value
of the vehicle as provided in subdivision (c).
(c) Subject to subdivision (d), the realized value of the vehicle
used to calculate the lessee's liability under paragraph (5) of
subdivision (b) shall be (1) if the lessee maintains insurance on the
leased vehicle as required in the lease contract and the vehicle is
a total loss as a result of theft or damage, the amount of any
applicable insurance deductible owed by the lessee and the proceeds
of the settlement of the insurance claim, unless a higher amount is
agreed to by the holder of the lease contract, (2) if the lessee
elects to have an appraisal conducted as provided in Regulation M,
the value determined on appraisal, (3) if the holder of the lease
contract or lessor elects to retain ownership of the vehicle for use
or to lease to a subsequent lessee, the wholesale value of the
vehicle as specified in the current edition of a recognized used
vehicle value guide customarily used by California motor vehicle
dealers to value vehicles in this state, including, but not limited
to, the Kelley Blue Book Auto Market Report and the N.A.D.A. Official
Used Car Guide, or (4) under all other circumstances, the higher of
(A) the price paid for the vehicle upon disposition, or (B) any other
amount established by the lessor or the lease contract.
(d) (1) The lessor or holder of the lease contract shall act in
good faith and in a commercially reasonable manner in connection with
the disposition of the vehicle.
(2) In addition to the requirements of paragraph (1), any
disposition of the vehicle shall be preceded by a notice complying
with both of the following:
(A) The notice shall be in writing and given by the holder of the
contract to each lessee and guarantor at least 10 days in advance of
any disposition or the date by which the value of the vehicle will be
determined pursuant to paragraph (3) of subdivision (c). The notice
shall be personally served or shall be sent by certified mail, return
receipt requested, or first-class mail, postage prepaid, directed to
the last known address of each lessee and guarantor. One notice is
sufficient if those persons are married to each other and the most
recent records of the holder of the lease contract indicate that they
reside at the same address. The last known address of each lessee
and guarantor shall be presumed to be the address stated in the lease
contract or guaranty for each lessee and guarantor unless the lessee
or guarantor notifies the holder of the lease contract of a change
of address.
(B) The notice shall set forth (i) the time and place of any
public sale, the time on or after which a private sale or other
intended disposition is to be made, or the date by which the value of
the vehicle will be determined pursuant to paragraph (3) of
subdivision (c), (ii) an itemization of all amounts claimed under
paragraphs (1) to (4), inclusive, of subdivision (b), (iii) the
amount of the difference between the adjusted capitalized cost and
the sum of all depreciation and other amortized amounts paid through
the date of early termination as provided in paragraph (5) of
subdivision (b), (iv) the total of these amounts identified as the
"Gross Early Termination Amount," and (v) one of the following
statements, whichever is applicable: