§ 355-9-407

355.9 -407 Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest. (1) Except as otherwise provided in subsection (2) of this section, a term in a lease agreement is ineffective to the extent that it : (a) 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 lesso r's residual interest in the goods; or (b) 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. (2) Except as otherwise provided in KRS 355.2A -303(7), a term described in subsection (1)(b) of this section is effective to the extent that there is: (a) A transfer by the lessee of the lessee's right of possess ion or use of the goods in violation of the term; or (b) A delegation of a material performance of either party to the lease contract in violation of the term.

lessee of the lessee's right of possess ion or use of the goods in violation of the term; or (b) A delegation of a material performance of either party to the lease contract in violation of the term. (3) 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 im posed on the lessee within the purview of KRS 355.2A -303(4) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the lessor. Effective: July 1, 2001 History: Repealed and reenacted 2001 Ky. Acts ch. 119, sec. 12, effective July 1, 2001. -- Repealed and reenacted 2000 Ky. Acts ch. 408, sec. 89, effective July 1, 2001. -- Created 1986 Ky. Acts ch. 118, sec. 80, effective July 1, 1987.