47-1203. Lease distinguished from security interest
A. Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.
B. A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:
1. The original term of the lease is equal to or greater than the remaining economic life of the goods;
2. The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
3. The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration on compliance with the lease agreement; or
4. The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration on compliance with the lease agreement.
C. A transaction in the form of a lease does not create a security interest merely because:
1. The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;
2. The lessee assumes risk of loss of the goods;
3. The lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording or registration fees or service or maintenance costs;
4. The lessee has an option to renew the lease or to become the owner of the goods;
5. The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or
6. The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.
D. Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:
1. When the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or
2. When the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.
E. The "remaining economic life of the goods" and “reasonably predictable" fair market rent, fair market value or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into.
Notes of Decisions
Sunshine Heifers, LLC v. Citizens First Bank (In Re Purdy), 763 F.3d 513 (6th Cir. 2014).
· cites it 5× “Under Arizona law, “the facts of each case” dictate whether an agreement is a true lease or a security agreement, Ariz. Rev. Stat. § 47-1203 (A), and our fact-sensitive analysis proceeds in two steps.”
City of Phoenix v. Great W. Bank & Trust, 712 P.2d 966 (Ariz. Ct. App. 1985).
· cites it 5× “If not apparent from the nature of express and implied duties concerning *62 checks, A.R.S. § 47-1203 explicitly references “contract.”
Parrish v. United Bank of Arizona, 790 P.2d 304 (Ariz. Ct. App. 1990).
· cites it 2× “1 Parrish filed this action against the bank alleging fraud, negligent misrepresentation, breach of fiduciary duty, bad faith breach of contract, breach of contract, and violation of A.R.S. § 47-1203. The bank moved for summary judgment on the basis of the language in the…”
GEO Fin., LLC v. Univ. Square 2751, LLC, 105 F. Supp. 3d 753 (E.D. Mich. 2015).
· cites it 2× “at 519. However, ,“[a]t all points in this analysis, the party challenging the lease[ ] bears the burden of proving that [it is] something else.”
Sunshine Heifers, LLC v. Moohaven Dairy, LLC, 13 F. Supp. 3d 770 (E.D. Mich. 2014).
· cites it 5× “Ariz.Rev. Stat. § 47-1203(B)(2). Here, although Moohaven alleges that it was “essentially bound to become the owner” of the cows because it would have made economic sense to do so, assuming arguendo that it could purchase the cows by paying $240 per head, there is no language in…”
— Ariz. Rev. Stat. § 47-1203(A) — 1 case
Sunshine Heifers, LLC v. Citizens First Bank (In Re Purdy), 763 F.3d 513 (6th Cir. 2014).
“Under Arizona law, “the facts of each case” dictate whether an agreement is a true lease or a security agreement, Ariz. Rev. Stat. § 47-1203 (A), and our fact-sensitive analysis proceeds in two steps.”
— Ariz. Rev. Stat. § 47-1203(B) — 1 case
GEO Fin., LLC v. Univ. Square 2751, LLC, 105 F. Supp. 3d 753 (E.D. Mich. 2015).
“at 519. However, ,“[a]t all points in this analysis, the party challenging the lease[ ] bears the burden of proving that [it is] something else.”
— Ariz. Rev. Stat. § 47-1203(B)(2) — 1 case
Sunshine Heifers, LLC v. Moohaven Dairy, LLC, 13 F. Supp. 3d 770 (E.D. Mich. 2014).
“Ariz.Rev. Stat. § 47-1203(B)(2). Here, although Moohaven alleges that it was “essentially bound to become the owner” of the cows because it would have made economic sense to do so, assuming arguendo that it could purchase the cows by paying $240 per head, there is no language in…”
— Ariz. Rev. Stat. § 47-1203(B)(3) — 1 case
Sunshine Heifers, LLC v. Moohaven Dairy, LLC, 13 F. Supp. 3d 770 (E.D. Mich. 2014).
“Ariz.Rev. Stat. § 47-1203(B)(2). Here, although Moohaven alleges that it was “essentially bound to become the owner” of the cows because it would have made economic sense to do so, assuming arguendo that it could purchase the cows by paying $240 per head, there is no language in…”
— Ariz. Rev. Stat. § 47-1203(B)(4) — 1 case
Sunshine Heifers, LLC v. Moohaven Dairy, LLC, 13 F. Supp. 3d 770 (E.D. Mich. 2014).
“Ariz.Rev. Stat. § 47-1203(B)(2). Here, although Moohaven alleges that it was “essentially bound to become the owner” of the cows because it would have made economic sense to do so, assuming arguendo that it could purchase the cows by paying $240 per head, there is no language in…”
— Ariz. Rev. Stat. § 47-1203(B)(l) — 1 case
Sunshine Heifers, LLC v. Moohaven Dairy, LLC, 13 F. Supp. 3d 770 (E.D. Mich. 2014).
“Ariz.Rev. Stat. § 47-1203(B)(2). Here, although Moohaven alleges that it was “essentially bound to become the owner” of the cows because it would have made economic sense to do so, assuming arguendo that it could purchase the cows by paying $240 per head, there is no language in…”
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