Texas Business & Commerce Code

§ 9.407 — RESTRICTIONS ON CREATION OR ENFORCEMENT OF SECURITY INTEREST IN LEASEHOLD INTEREST OR IN LESSOR'S RESIDUAL INTEREST

BC § 9.407Title 1. UNIFORM COMMERCIAL CODE · Ch. 9. SECURED TRANSACTIONS · Art. D. RIGHTS OF THIRD PARTIES

Statute text

(a)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)Except as otherwise provided in Section 2A.303(g), 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.

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Legislative history

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1, 2001; Acts 2001, 77th Leg., ch. 705, Sec. 12, eff. June 13, 2001.