New York Uniform Commercial Code Law Section 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
                Interest in Leasehold Interest or in Lessor's Residual
                Interest.
(a) Term  restricting  assignment  generally  ineffective.  Except  as
  otherwise  provided  in  subsection  (b), a term in a lease agreement is
  ineffective to the extent that it:
     (1) prohibits, restricts, or requires the consent of a  party  to
         the  lease to the assignment or transfer of, or the creation,
         attachment, perfection, or enforcement of a security interest
         in, an interest of a party under 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  give  rise  to  a  default,  breach,  right  of
         recoupment,    claim,    defense,   termination,   right   of
         termination, or remedy under the lease.
(b) Effectiveness of certain terms. Except as  otherwise  provided  in
  Section  2-A-303(7),  a term described 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
         or use of the goods in violation of the term; or
     (2) a delegation of a material performance of either party to the
         lease contract in violation of the term.
(c) Security   interest   not   material   impairment.  The  creation,
  attachment, perfection, or enforcement of a  security  interest  in  the
  lessor's  interest  under  the  lease  contract or the lessor's residual
  interest in the goods is not a  transfer  that  materially  impairs  the
  lessee's  prospect of obtaining return performance or materially changes
  the duty of or materially increases the burden or risk  imposed  on  the
  lessee within the purview of Section 2-A-303(4) unless, and then only to
  the  extent  that,  enforcement  actually  results  in  a  delegation of
  material performance of the lessor.

Last modified: February 3, 2019