§ 9-407 — Restrictions on Creation or Enforcement of Security Interest in Leasehold Interest or in Lessor's Residual Interest

Section 9--407. Restrictions on Creation or Enforcement of Security\n Interest in Leasehold Interest or in Lessor's Residual\n Interest.\n (a) Term restricting assignment generally ineffective. Except as\notherwise provided in subsection (b), a term in a lease agreement is\nineffective to the extent that it:\n (1) prohibits, restricts, or requires the consent of a party to\n the lease to the assignment or transfer of, or the creation,\n attachment, perfection, or enforcement of a security interest\n in, an interest of a party under the lease contract or in the\n lessor's residual interest in the goods; or\n (2) provides that the assignment or transfer or the creation,\n attachment, perfection, or enforcement of the security\n interest may give rise to a default, breach, right of\n recoupment, claim, defense, termination, right of\n termination, or remedy under the lease.\n (b) Effectiveness of certain terms. Except as otherwise provided in\nSection 2-A-303(7), a term described in subsection (a)(2) is effective\nto the extent that there is:\n (1) a transfer by the lessee of the lessee's right of possession\n or use of the goods in violation of the term; or\n (2) a delegation of a material performance of either party to the\n lease contract in violation of the term.\n (c) Security interest not material impairment. The creation,\nattachment, perfection, or enforcement of a security interest in the\nlessor's interest under the lease contract or the lessor's residual\ninterest in the goods is not a transfer that materially impairs the\nlessee's prospect of obtaining return performance or materially changes\nthe duty of or materially increases the burden or risk imposed on the\nlessee within the purview of Section 2-A-303(4) unless, and then only to\nthe extent that, enforcement actually results in a delegation of\nmaterial performance of the lessor.\n