{"data":{"id":"us-ky/krs-355.1-203","jurisdiction":"us-ky","citation":"KRS 355.1-203","heading":"Lease distinguished from security interest.","body":"(1) Whether a transaction in the form of a lease creates a lease or security interest is\ndetermined by the facts of each case.\n(2) A transaction in the form of a lease creates a security interest if the consideration\nthat the lessee is to pay the lessor for th e right to possession and use of the goods is\nan obligation for the term of the lease and is not subject to termination by the lessee,\nand:\n(a) The original term of the lease is equal to or greater than the remaining\neconomic life of the goods;\n(b) The lessee is bound to renew the lease for the remaining economic life of the\ngoods or is bound to become the owner of the goods;\n(c) The lessee has an option to renew the lease for the remaining economic life of\nthe goods for no additional consideration or for n ominal additional\nconsideration upon compliance with the lease agreement; or\n(d) The lessee has an option to become the owner of the goods for no additional\nconsideration or for nominal additional consideration upon compliance with\nthe lease agreement.\n(3) A transaction in the form of a lease does not create a security interest merely\nbecause:\n(a) The present value of the consideration the lessee is obligated to pay the lessor\nfor the right to possession and use of the goods is substantially equal to or is\ngreater than the fair market value of the goods at the time the lease is entered\ninto;\n(b) The lessee assumes risk of loss of the goods;\n(c) The lessee agrees to pay, with respect to the goods, taxes, insurance, filing,\nrecording, or registration fees, or service or maintenance costs;\n(d) The lessee has an option to renew the lease or to become the owner of the\ngoods;\n(e) The lessee has an option to renew the lease for a fixed rent that is equal to or\ngreater than the reasonably predictable fair market rent  for the use of the\ngoods for the term of the renewal at the time the option is to be performed; or\n(f) The lessee has an option to become the owner of the goods for a fixed price\nthat is equal to or greater than the reasonably predictable fair market valu e of\nthe goods at the time the option is to be performed.\n(4) Additional consideration is nominal if it is less than the lessee's reasonably\npredictable cost of performing under the lease agreement if the option is not\nexercised. Additional consideration is not nominal if:\n(a) When the option to renew the lease is granted to the lessee, the rent is stated to\nbe the fair market rent for the use of the goods for the term of the renewal\ndetermined at the time the option is to be performed; or\n(b) When the option to become the owner of the goods is granted to the lessee, the\nprice is stated to be the fair market value of the goods determined at the time\nthe option is to be performed.\n(5) The \"remaining economic life of the goods\" and \"reasonably pre dictable\" fair\nmarket rent, fair market value, or cost of performing under the lease agreement must\nbe determined with reference to the facts and circumstances at the time the\ntransaction is entered into.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=33227","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:41Z","sha256":"5b8d2fc2b4450091c4d9d8105d039bf138dfa9e0967a613345d4ba319c22c8d2","source_id":"us-ky","stale":false,"prev":"us-ky/krs-355.1-202","next":"us-ky/krs-355.1-204"},"notice":"GroundRules: Original legal text. Not legal advice."}