§ 25-9-407. Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest.

NORTH CAROLINA STATUTES AND CODES

§ 25-9-407. Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest.

§25‑9‑407. Restrictions on creation or enforcement of securityinterest in leasehold interest or in lessor's residual interest.

(a) Term restrictingassignment generally ineffective. Except as otherwise provided in subsection(b) of this section, a term in a lease agreement is ineffective to the extentthat it:

(1) Prohibits,restricts, or requires the consent of a party to the lease to the assignment ortransfer of, or the creation, attachment, perfection, or enforcement of asecurity interest in, an interest of a party under the lease contract or in thelessor's residual interest in the goods; or

(2) Provides that theassignment or transfer or the creation, attachment, perfection, or enforcementof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedy underthe lease.

(b) Effectiveness ofcertain terms. Except as otherwise provided in G.S. 25‑2A‑303(7),a term described in subdivision (a)(2) of this section is effective to theextent that there is:

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

(2) A delegation of amaterial performance of either party to the lease contract in violation of theterm.

(c) Security interestnot material impairment. The creation, attachment, perfection, or enforcementof a security interest in the lessor's interest under the lease contract or thelessor's residual interest in the goods is not a transfer that materially impairsthe lessee's prospect of obtaining return performance or materially changes theduty of or materially increases the burden or risk imposed on the lessee withinthe purview of G.S. 25‑2A‑303(4) unless, and then only to theextent that, enforcement actually results in a delegation of materialperformance of the lessor. (1993, c. 463, s. 1; 2000‑169, s. 1.)