                                 CODE OF VIRGINIA

RESTRICTIONS ON CREATION OR ENFORCEMENT OF SECURITY INTEREST IN LEASEHOLD
INTEREST OR IN LESSOR&#8217;S RESIDUAL INTEREST (§ 8.9A-407)

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&#8217;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 § 8.2A-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&#8217;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&#8217;s interest
under the lease contract or the lessor&#8217;s residual interest in the goods is
not a transfer that materially impairs the lessee&#8217;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 &#xA7; 8.2A-303 (4)
unless, and then only to the extent that, enforcement actually results in a
delegation of material performance of the lessor.

HISTORY: 1991, c. 536, § 8.2A-303; 2000, c. 1007.