Iowa Code

Iowa Code § 554.1203 (2026)

Lease distinguished from security interest

✓ current as of July 2026

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1. Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case. 2. 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: a. the original term of the lease is equal to or greater than the remaining economic life of the goods; b. 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; c. 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 upon compliance with the lease agreement; or d. the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement. 3. A transaction in the form of a lease does not create a security interest merely because: a. 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; b. the lessee assumes risk of loss of the goods; c. the lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs; d. the lessee has an option to renew the lease or to become the owner of the goods; e. 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 f. 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. 4. 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: a. 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 b. 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. 5. 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. 2007 Acts, ch 41, §14, 57 Referred to in §554.1201\n\nTue Dec 09 22:02:40 2025 Iowa Code 2026, Chapter 554 (108, 4) §554.1204, UNIFORM COMMERCIAL CODE 20

Notes of Decisions

Cited in 15 cases, 1973–2015 · leading case: Nora Springs Coop. Co. v. Brandau, 247 N.W.2d 744 (Iowa 1976).

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Nora Springs Coop. Co. v. Brandau, 247 N.W.2d 744 (Iowa 1976). · cites it 6× “In its final assignment of error, plaintiff contends trial court erred by failing to apply section 554.1203 requirements of “good faith” to defendant’s cancellation of the corn contracts.”

Gen. Elec. Capital Corp. v. FPL Serv. Corp., 986 F. Supp. 2d 1029 (N.D. Iowa 2013). · cites it 9× “It provides: 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,…”

C & J Vantage Leasing Co. v. Outlook Farm Golf Club, LLC, 784 N.W.2d 753 (Iowa 2010). · cites it 2× “1201(37)(¾), now codified as Iowa Code section 554.1203, states that a transaction 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…”

C & J Fertilizer, Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169 (Iowa 1975). · cites it 2× “1201(10) ("* * * Language in the body of a form is `conspicuous' if it is in larger or other contrasting type or color * * *"); § 554.1203 ("Every contract or duty * * imposes an obligation of good faith in its performance or enforcement"); § 554.”

Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129 (5th Cir. 1979). “Iowa Code Ann. § 554.1203 . The good faith obligation is one of those obliga *137 tions that section 1-102 of the Code says “may not be disclaimed by agreement”.”

Schley v. Peoples Bank (In re Schley), 509 B.R. 901 (Bankr. D. Iowa 2014). · cites it 2× “Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to section 554.1203. Id. § 554.1201(2)(ai). An agricultural lien is defined as: an interest, other than a security interest, in farm products: (1) which secures payment or…”

Citizens Sav. Bank v. Sac City State Bank, 315 N.W.2d 20 (Iowa 1982). “Trial court, however, held Citizens could not rely on Sac City’s failure to refile following the incorporation, on the basis of equitable estoppel and the sections 554.1203 and 554.1201(19) good faith requirements.”

Beneficial Fin. Co. of Black Hawk Cnty. v. Reed, 212 N.W.2d 454 (Iowa 1973). · cites it 2× “See section 554.1203 and annotations thereto.”

Leonard Steinmetz & Adah Steinmetz & Winnebago Indus., Inc. v. The Bradbury Co., Inc., 618 F.2d 21 (8th Cir. 1980). “Iowa Code § 554.1203 (UCC § 1-203). In general, good faith means no more than honesty in fact in the transaction.”

Theus v. Pioneer Hi-Bred Int'l, Inc., 738 F. Supp. 1252 (S.D. Iowa 1990). · cites it 2× “Iowa Code § 554.1203 (1989); Nora Springs Coop.”

Affiliated Foods, Inc. v. McGinley, 426 N.W.2d 646 (Iowa Ct. App. 1988). · cites it 2× “Iowa Code section 554.1203 imposes the obligation that parties must deal with each other in good faith.”

Select Pork, Inc. v. Babcock Swine, Inc., 640 F.2d 147 (8th Cir. 1981). “” Iowa Code Ann. § 554.1203 ; “‘Good faith’ means honesty in fact in the conduct or transaction concerned.”

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— Iowa Code § 554.1203(2) — 2 cases

Gen. Elec. Capital Corp. v. FPL Serv. Corp., 986 F. Supp. 2d 1029 (N.D. Iowa 2013). “It provides: 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,…”

Cd Constr., L.L.C. v. Hard Hat Indus., Inc. (Iowa Ct. App. 2015).

— Iowa Code § 554.1203(2)(a) — 1 case

Cd Constr., L.L.C. v. Hard Hat Indus., Inc. (Iowa Ct. App. 2015).

— Iowa Code § 554.1203(2)(b) — 1 case

Cd Constr., L.L.C. v. Hard Hat Indus., Inc. (Iowa Ct. App. 2015).

— Iowa Code § 554.1203(2)(d) — 1 case

Cd Constr., L.L.C. v. Hard Hat Indus., Inc. (Iowa Ct. App. 2015).

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.