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The Vermont Statutes Online



Title

09A

:
Uniform Commercial Code






Chapter

001

:
General Provisions











 

§

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. (Amended 2007, No.

99 (Adj. Sess.), § 2.)