Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
A Lease Is a Lease Is a ' Loan? Avoiding Recharacterization
The topic of recharacterizing leases as secured loans is not a new one, and is a staple of programs on yearly developments in commercial law. The drafters of the revisions to the 1978 Official Text of the UCC recognized that the focus on whether a lease was “intended as security” in the definition of security interest in ' 1-201(37) had the “unfortunate result” of courts looking to inconsistent factors to discover the intent of the parties. (See the Official Comment to UCC ' 1-203.) The drafters put forward the current definition of security interest in ' 1-201(35) with no reference to the parties' intent, and moved the rules distinguishing leases from security interests to ' 1-203, hoping to achieve “greater certainty” for commercial transactions. Yet, practitioners and courts alike continue to ignore the statutory bright-line tests and persist in applying a variety of other tests and interpretations that have resulted in conflicting decisions as to what is a lease and what is a disguised security interest. The applicability of UCC Article 9 to transactions styled as leases is a question that is debated in courts repeatedly year after year, with recent years being no exception. This article explores the impact of recharacterization, and discusses the tests developed by courts to determine whether a lease will be considered to be a secured loan. Then, a review of the most recent cases shows the characterization tests in practice.
A lease is a financing vehicle much like a loan is. A lease involves a lessor acquiring an asset which is then provided to a lessee for a specified term in exchange for rental payments. A loan involves a lender giving a borrower the funds to purchase the desired asset in exchange for a promise to repay the loan. In both situations, the user of the asset obtains that use through financing provided by another. However, while leases and loans are each financing tools, the classification of the individual transaction as one or the other matters greatly.
Law Firms are Reducing Redundant Real Estate by Bringing Support Services Back to the Office
A trend analysis of the benefits and challenges of bringing back administrative, word processing and billing services to law offices.
New York's Latest Cybersecurity Commitment
On Aug. 9, 2023, Gov. Kathy Hochul introduced New York's inaugural comprehensive cybersecurity strategy. In sum, the plan aims to update government networks, bolster county-level digital defenses, and regulate critical infrastructure.
Bit Parts
Summary Judgment Denied Defendant in Declaratory Action by Producer of To Kill a Mockingbird Broadway Play Seeking Amateur Theatrical Rights
Risks of “Baseball Arbitration” in Resolving Real Estate Disputes
“Baseball arbitration” refers to the process used in Major League Baseball in which if an eligible player's representative and the club ownership cannot reach a compensation agreement through negotiation, each party enters a final submission and during a formal hearing each side — player and management — presents its case and then the designated panel of arbitrators chooses one of the salary bids with no other result being allowed. This method has become increasingly popular even beyond the sport of baseball.
Disconnect Between In-House and Outside Counsel
'Disconnect Between In-House and Outside Counsel is a continuation of the discussion of client expectations and the disconnect that often occurs. And although the outside attorneys should be pursuing how inside-counsel actually think, inside counsel should make an effort to impart this information without waiting to be asked.