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CLFP EXAM (Leasing Law) with Questions & Answers Graded A
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CLFP EXAM (Leasing Law) withQuestions & Answers Graded A
When is a lease renewal not nominal? - ✔✔1.) when the option to renew is granted the rent is
stated to be fair market rent determined at the time of the option
2.) when the option to renew is granted the price is stated to be fair market value at the time of
the option
How are "reasonably predictable" and "useful economic life" determined? - ✔✔with reference to
the facts and circumstances at the time the transaction is entered.
What is Present Value? - ✔✔the amount as of the date of one or more future payments
discounted to the certain date. If not specified by the contract, the discount rate is determined by the
courts as a commercially reasonable at the time the transaction was entered.
How is "residual position" used by courts to designate lease vs. loan? - ✔✔If the lease allows the
lessee to purchase the asset for substantially less than the FMV, the lease will be deemed a secured loan
What are other consideration the courts use in determining lease vs. loan treatment? - ✔✔1.)
length of term vs. economic useful life
2.) responsibility to pay state and local tax,
3.) operating expenses and insurance
4.) benefit and burden of ownership
, Contrast True Lease/Secured Loan - Bankruptcy - ✔✔Generally, a lessor under a true lease has
better rights to recover equipment in a bk.
Contrast True Lease/Secured Loan - Interest/Usury - ✔✔Interest is charged on a secured loan, but
not on a lease. Therefore a true lease may avoid usury laws. True lease has rent payments whereas a
secured loan has interest/principal payments.
Contrast True Lease/Secured Loan - Collateral - ✔✔It is incorrect to referred to leased equipment
as collateral but it is appropriate for a secured loan. Both require good maintenance of the equipment.
Lease has return provisions
Contrast True Lease/Secured Loan - Liability - ✔✔Generally speaking their is more exposure to
the lessor on a true lease for liability
Contrast True Lease/Secured Loan - UCC Rights - ✔✔UCC distinguishes true lease and loans in
several ways. True Lease = UCC 2A. Secured Loan = UCC 9. In a lease, lessor owns equipment. In a loan,
the lessee owns the equipment and the lender has security interest
Contrast True Lease/Secured Loan - Filing/Title - ✔✔It is not required for a lessor to file a UCC for a
true lease. Leases are not governed by UCC Article 9 and there is not filing requirement under article 2A.
Contrast True Lease/Secured Loan - Residual - ✔✔With respect to vehicles, aircraft and other titled
equipment true leases require the lessor to be shown as the owner. Whereas secured loans require
notation on certificate of title of the lender's interest.
What rights does a lessee enjoy in a True Lease? - ✔✔Use and enjoyment of the leased
equipment free from interference of the lessor as long as the lessee has not defaulted.
What rights does the lessor enjoy in a True Lease? - ✔✔The rights of ownership including tax
benefits and the right to increase in value
What rights does a lessee enjoy in a Secured Loan? - ✔✔Right to purchase the equipment at the
end of the lease. The lessee also has rights to the asset appreciation
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