Tennessee Code Annotated

Tenn. Code Ann. § 47-9-407 (2026)

Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest

✓ current as of May 2026

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(a) Term restricting assignment generally ineffective. 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) Effectiveness of certain terms. Except as otherwise provided in § 47-2A-303(7), a term described in subdivision (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.

(c) Security interest not material impairment. 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 imposed on the lessee within the purview of § 47-2A-303(4) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the lessor.

Acts 2000, ch. 846, § 1.

Notes of Decisions

Cited in 5 cases, 1970–2007 · leading case: In Re Hayes, 376 B.R. 655 (Bankr. M.D. Tenn. 2007).

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In Re Hayes, 376 B.R. 655 (Bankr. M.D. Tenn. 2007). · cites it 2× “26 Of former § 47-9-107(c) it has been said: “By virtue of adding subsection (c) to T.C.A. § 47-9-407, the Tennessee legislature issued a statutory guideline for courts to use in determining the extent of a creditor’s purchase money security interest when the contracts between…”

In Re Bray, 365 B.R. 850 (Bankr. W.D. Tenn. 2007). · cites it 2× “1984) By virtue of adding subsection (c) to T.C.A. § 47-9-407, the Tennessee legislature issued a statutory guideline for courts to use in determining the extent of a creditor’s purchase money security interest when the contracts between the parties did not provide such a method.”

In Re French, 317 F. Supp. 1226 (E.D. Tenn. 1970). “§ 47-9-407 “Information from filing officer.”

Walker v. Tennessee State Bank (In Re Williams), 112 B.R. 913 (Bankr. E.D. Tenn. 1990). · cites it 3× “Tenn.Code Ann. § 47-9-407 comment 1 (1979).”

Chattanooga Ag Assoc v. William F. Sapp, Joy G. Sapp, Tri-Cnty. Equip. Inc., Deer & Co., Gary Seals, D/B/A Gary Seals Livestock & Citizens Tri-Cnty. Bank (Tenn. Ct. App. 2004). · cites it 4× “-4- Tenn. Code Ann. §47-9-407 , Comments to Official Text (note 1).”

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