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Auto-Renewals and the True Lease Question
Whether a transaction called a lease is indeed a lease ' i.e., a true lease ' or instead a lease that creates a security interest is an issue that arises frequently in case law. It often comes up in the context of bankruptcy proceedings, where the treatment of true leases and secured transactions differs in very significant ways. Outside of bankruptcy, if the rights of a lessor against a lessee in default are to be enforced, there is likewise a very material difference in the rights and obligations of both parties depending upon whether the Uniform Commercial Code (UCC) Article to be applied is Article 2A governing true leases or Article 9 governing secured transactions.
Pacific Space Design
A recent case illustrates yet another context in which the true lease/security interest distinction can arise, and demonstrates how not fully appreciating this distinction can lead to a questionable result. In Pacific Space Design Corp. v. PNC Equipment Finance, LLC, 2014 WL 6603288, 2014 U.S.Dist. LEXIS 162274 (S.D.Ohio Nov. 19, 2014), the plaintiff/lessee had entered into a lease with an automatic renewal provision expressed as follows:
If no default exists under this Lease, you [the Lessee] will have the option at the end of the initial or any renewal term to purchase all (but not less than all) of the Equipment at the Purchase Option price shown at the front of this Lease, plus any applicable taxes. Unless the Purchase Option price is $1.00, you must give us [the Lessor] at least 60 days written notice before the end of the initial term that you will purchase the Equipment or that you will return the Equipment to us. If you do not give us such written notice or if you do not purchase or deliver the Equipment in accordance with the terms and conditions of the Lease, this Lease will automatically renew for an additional 12 month term and therefore [sic] renew for successive one month terms until you deliver the Equipment to us. During such renewal(s) the lease payment will remain the same ' . Upon payment of the Purchase Option price, we shall transfer our interest in the Equipment to you “AS IS, WHERE IS” without any representation or warranty whatsoever and the lease will terminate.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Anti-Assignment Override Provisions
UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?