400.9-407. Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest.

Restrictions on creation or enforcement of security interest inleasehold interest or in lessor's residual interest.

400.9-407. (a) Except as otherwise provided in subsection (b), aterm in a lease agreement is ineffective to the extent that it:

(1) Prohibits, restricts, or requires the consent of a party to thelease to the assignment or transfer of, or the creation, attachment,perfection, or enforcement of a security interest in an interest of a partyunder the lease contract or in the lessor's residual interest in the goods;or

(2) Provides that the assignment or transfer or the creation,attachment, perfection, or enforcement of the security interest may giverise to a default, breach, right of recoupment, claim, defense,termination, right of termination, or remedy under the lease.

(b) Except as otherwise provided in section 400.2A-303(7), a termdescribed in subsection (a)(2) is effective to the extent that there is:

(1) A transfer by the lessee of the lessee's right of possession oruse of the goods in violation of the term; or

(2) A delegation of a material performance of either party to thelease contract in violation of the term.

(c) The creation, attachment, perfection, or enforcement of asecurity interest in the lessor's interest under the lease contract or thelessor's residual interest in the goods is not a transfer that materiallyimpairs the lessee's prospect of obtaining return performance or materiallychanges the duty of or materially increases the burden or risk imposed onthe lessee within the purview of section 400.2A-303(4) unless, and thenonly to the extent that, enforcement actually results in a delegation ofmaterial performance of the lessor.

(L. 1963 p. 503 § 9-407, A.L. 1965 p. 595, A.L. 1978 S.B. 755, A.L. 1988 S.B. 583, A.L. 2001 S.B. 288, A.L. 2002 S.B. 895)