N.Y. Uniform Commercial Code Law § 9-407: Restrictions on Creation or Enforcement of Security Interest in Leasehold Interest or in Lessor's Residual Interest

Section 9--407. Restrictions on Creation or Enforcement of Security

Interest in Leasehold Interest or in Lessor's Residual

Interest.

(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

Section 2-A-303(7), 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.

(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 Section 2-A-303(4) unless, and then only to

the extent that, enforcement actually results in a delegation of

material performance of the lessor.