§ 4-1-203 — Lease distinguished from security interest

Colorado § 4-1-203

• Jurisdiction: Colorado
• Title 04: Uniform
• Art.: General Provisions

Text

(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 taxes, insurance, filing, recording, or
registration fees, or service or maintenance costs, with respect to the goods;

(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
shall be determined with reference to the facts and circumstances at the time the
transaction is entered into.

Legislative History

Source: L. 2006: Entire article R&RE, p. 464, � 1, effective September 1.