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(810 ILCS 5/Art.
2A Pt. 3 heading)
PART
3. EFFECT OF LEASE CONTRACT
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(810 ILCS 5/2A-301) (from Ch. 26,
par. 2A-301)
Sec. 2A-301. Enforceability
of lease contract. Except as otherwise provided in this Article,
a lease contract is effective and enforceable according to
its terms between the parties, against purchasers of the goods
and against creditors of the parties.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-302) (from Ch. 26,
par. 2A-302)
Sec. 2A-302. Title to and
possession of goods. Except as otherwise provided in this Article,
each provision of this Article applies whether the lessor or
a third party has title to the goods, and whether the lessor,
the lessee, or a third party has possession of the goods, notwithstanding
any statute or rule of law that possession or the absence of
possession is fraudulent.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-303) (from Ch. 26,
par. 2A-303)
Sec. 2A-303. Alienability
of party's interest under lease contract or of lessor's residual
interest in goods; delegation of performance; transfer of rights.
(1) As used in this Section, "creation
of a security interest" includes the sale of a lease contract
that is subject to Article 9, Secured Transactions, by reason
of Section 9-109(a)(3).
(2) Except as provided in subsection
(3) and Section 9-407, a provision in a lease agreement
which (i) prohibits the voluntary or involuntary transfer, including
a transfer by sale, sublease, creation or enforcement of a security
interest, or attachment, levy, or other judicial process, of
an interest of a party under the lease contract or of the lessor's
residual interest in the goods, or (ii) makes such a transfer
an event of default, gives rise to the rights and remedies provided
in subsection (4), but a transfer that is prohibited or is an
event of default under the lease agreement is otherwise effective.
(3) A provision in a lease agreement
which (i) prohibits a transfer of a right to damages for default
with respect to the whole lease contract or of a right to payment
arising out of the transferor's due performance of the transferor's
entire obligation, or (ii) makes such a transfer an event of
default, is not enforceable, and such a transfer is not a transfer
that materially impairs the prospect of obtaining return performance
by, materially changes the duty of, or materially increases the
burden or risk imposed on, the other party to the lease contract
within the purview of subsection (4).
(4) Subject to subsection (3) and
Section 9-407:
(a) if
a transfer is made which is made an event of
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default under a lease agreement, the
party to the lease contract not making the transfer,
unless that party waives the default or otherwise
agrees, has the rights and remedies described in
Section 2A-501(2);
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(b)
if paragraph (a) is not applicable and if a
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transfer is made that (i) is prohibited
under a lease agreement or (ii) materially impairs
the prospect of obtaining return performance by,
materially changes the duty of, or materially increases
the burden of risk imposed on, the other party
to the lease contract, unless the party not making
the transfer agrees at any time to the transfer
in the lease contract or otherwise, then, except
as limited by contract, (i) the transferor is liable
to the party not making the transfer for damages
caused by the transfer to the extent that the damages
could not reasonably be prevented by the party
not making the transfer and (ii) a court having
jurisdiction may grant other appropriate relief,
including cancellation of the lease contract or
an injunction against the transfer.
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(5) A transfer
of "the lease" or of "all my rights under
the lease", or a transfer in similar general terms,
is a transfer of rights and, unless the language or the
circumstances, as in a transfer for security, indicate
the contrary, the transfer is a delegation of duties by
the transferor to the transferee. Acceptance by the transferee
constitutes a promise by the transferee to perform those
duties. The promise is enforceable by either the transferor
or the other party to the lease contract.
(6) Unless otherwise agreed by
the lessor and the lessee, a delegation of performance does not
relieve the transferor as against the other party of any duty to
perform or of any liability for default.
(7) In a consumer lease, to prohibit
the transfer of an interest of a party under the lease contract
or to make a transfer an event of default, the language must be
specific, by a writing, and conspicuous.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/2A-304) (from Ch. 26,
par. 2A-304)
Sec. 2A-304. Subsequent lease
of goods by lessor.
(1) Subject to Section 2A-303,
a subsequent lessee from a lessor of goods under an existing
lease contract obtains, to the extent of the leasehold interest
transferred, the leasehold interest in the goods that the lessor
had or had power to transfer and, except as provided in subsection
(2) and Section 2A-527(4), takes subject to the existing
lease contract. A lessor with voidable title has power to transfer
a good leasehold interest to a good faith subsequent lessee for
value, but only to the extent set forth in the preceding sentence.
If goods have been delivered under a transaction of purchase,
the lessor has that power even though:
(a) the
lessor's transferor was deceived as to the
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(b)
the delivery was in exchange for a check which
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(c)
it was agreed that the transaction was to be a
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(d)
the delivery was procured through fraud
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punishable as larcenous under the criminal
law.
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(2) A subsequent
lessee in the ordinary course of business from a lessor
who is a merchant dealing in goods of that kind to whom
the goods were entrusted by the existing lessee of that
lessor before the interest of the subsequent lessee became
enforceable against that lessor obtains, to the extent
of the leasehold interest transferred, all of that lessor's
and the existing lessee's rights to the goods, and takes
free of the existing lease contract.
(3) A subsequent lessee from the
lessor of goods that are subject to an existing lease contract
and are covered by a certificate of title issued under a statute
of this State or of another jurisdiction takes no greater rights
than those provided both by this Section and by the certificate
of title statute.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-305) (from Ch. 26,
par. 2A-305)
Sec. 2A-305. Sale or
sublease of goods by lessee.
(1) Subject to the provisions of
Section 2A-303, a buyer or sublessee from the lessee of
goods under an existing lease contract obtains, to the extent
of the interest transferred, the leasehold interest in the goods
that the lessee had or had power to transfer and, except as provided
in subsection (2) and Section 2A-511(4), takes subject
to the existing lease contract. A lessee with a voidable leasehold
interest has power to transfer a good leasehold interest to a
good faith buyer for value or a good faith sublessee for value,
but only to the extent set forth in the preceding sentence. When
goods have been delivered under a transaction of lease the lessee
has that power even though:
(a) the
lessor was deceived as to the identity of
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(b)
the delivery was in exchange for a check which
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(c)
the delivery was procured through fraud
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punishable as larcenous under the criminal
law.
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(2) A buyer in
the ordinary course of business or a sublessee in the ordinary
course of business from a lessee who is a merchant dealing
in goods of that kind to whom the goods were entrusted
by the lessor obtains, to the extent of the interest transferred,
all of the lessor's and lessee's rights to the goods, and
takes free of the existing lease contract.
(3) A buyer or sublessee from the
lessee of goods that are subject to an existing lease contract
and are covered by a certificate of title issued under a statute
of this State or of another jurisdiction takes no greater rights
than those provided both by this Section and by the certificate
of title statute.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-306) (from Ch. 26,
par. 2A-306)
Sec. 2A-306. Priority of
certain liens arising by operation of law. If a person in the
ordinary course of his or her business furnishes services or
materials with respect to goods subject to a lease contract,
a lien upon those goods in the possession of that person given
by statute or rule of law for those materials or services takes
priority over any interest of the lessor or lessee under the
lease contract or this Article unless the lien is created by
statute and the statute provides otherwise or unless the lien
is created by rule of law and the rule of law provides otherwise.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-307) (from Ch. 26,
par. 2A-307)
Sec. 2A-307. Priority of
liens arising by attachment or levy on, security interests
in, and other claims to goods.
(1) Except as otherwise provided
in Section 2A-306, a creditor of a lessee takes subject
to the lease contract.
(2) Except as otherwise provided
in subsection (3) and in Sections 2A-306 and 2A-308,
a creditor of a lessor takes subject to the lease contract unless
the creditor holds a lien that attached to the goods before the
lease contract became enforceable.
(3) Except as otherwise provided
in Sections 9-317, 9-321, and 9-323, a lessee
takes a leasehold interest subject to a security interest held
by a creditor of the lessor.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/2A-308) (from Ch. 26,
par. 2A-308)
Sec. 2A-308. Special rights
of creditors.
(1) A creditor of a lessor in possession
of goods subject to a lease contract may treat the lease contract
as void if as against the creditor retention of possession by
the lessor is fraudulent under any statute or rule of law, but
retention of possession in good faith and current course of trade
by the lessor for a commercially reasonable time after the lease
contract becomes enforceable is not fraudulent.
(2) Nothing in this Article impairs
the rights of creditors of a lessor if the lease contract (a)
becomes enforceable, not in current course of trade but in satisfaction
of or as security for a pre-existing claim for money, security,
or the like, and (b) is made under circumstances which under
any statute or rule of law apart from this Article would constitute
the transaction a fraudulent transfer or voidable preference.
(3) A creditor of a seller may
treat a sale or an identification of goods to a contract for
sale as void if as against the creditor retention of possession
by the seller is fraudulent under any statute or rule of law,
but retention of possession of the goods pursuant to a lease
contract entered into by the seller as lessee and the buyer as
lessor in connection with the sale or identification of the goods
is not fraudulent if the buyer bought for value and in good faith.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-309) (from Ch. 26,
par. 2A-309)
Sec. 2A-309. Lessor's and
lessee's rights when goods become fixtures.
(1) In this Section:
(a) goods
are "fixtures" when they become so related
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to particular real estate that an interest
in them arises under real estate law;
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(b)
a "fixture filing" is the filing, in the office
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where a mortgage on the real estate
would be filed or recorded, of a financing statement
covering goods that are or are to become fixtures
and conforming to the requirements of Section 9-502(a)
and (b);
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(c)
a lease is a "purchase money lease" unless the
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lessee has possession or use of the
goods or the right to possession or use of the
goods before the lease agreement is enforceable;
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(d)
a mortgage is a "construction mortgage" to the
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extent it secures an obligation incurred
for the construction of an improvement on land
including the acquisition cost of the land, if
the recorded writing so indicates; and
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(e) "encumbrance" includes
real estate mortgages and
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other liens on real estate and all other
rights in real estate that are not ownership interests.
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(2) Under this
Article a lease may be of goods that are fixtures or may
continue in goods that become fixtures, but no lease exists
under this Article of ordinary building materials incorporated
into an improvement on land.
(3) This Article does not prevent
creation of a lease of fixtures pursuant to real estate law.
(4) The perfected interest of a
lessor of fixtures has priority over a conflicting interest of
an encumbrancer or owner of the real estate if:
(a) the
lease is a purchase money lease, the
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conflicting interest of the encumbrancer
or owner arises before the goods become fixtures,
the interest of the lessor is perfected by a fixture
filing before the goods become fixtures or within
10 days thereafter, and the lessee has an interest
of record in the real estate or is in possession
of the real estate; or
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(b)
the interest of the lessor is perfected by a
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fixture filing before the interest of
the encumbrancer or owner is of record, the lessor's
interest has priority over any conflicting interest
of a predecessor in title of the encumbrancer or
owner, and the lessee has an interest of record
in the real estate or is in possession of the real
estate.
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(5) The interest
of a lessor of fixtures, whether or not perfected, has
priority over the conflicting interest of an encumbrancer
or owner of the real estate if:
(a) the
fixtures are readily removable factory or
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office machines, readily removable equipment
that is not primarily used or leased for use in
the operation of the real estate, or readily removable
replacements of domestic appliances that are goods
subject to a consumer lease, and before the goods
become fixtures the lease contract is enforceable;
or
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(b)
the conflicting interest is a lien on the real
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estate obtained by legal or equitable
proceedings after the lease contract is enforceable;
or
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(c)
the encumbrancer or owner has consented in
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writing to the lease or has disclaimed
an interest in the goods as fixtures; or
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(d)
the lessee has a right to remove the goods as
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against the encumbrancer or owner. If
the lessee's right to remove terminates, the priority
of the interest of the lessor continues for a reasonable
time.
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(6) Notwithstanding
subsection (4)(a) but otherwise subject to subsections
(4) and (5), the interest of a lessor of fixtures, including
the lessor's residual interest, is subordinate to the conflicting
interest of an encumbrancer of the real estate under a
construction mortgage recorded before the goods become
fixtures if the goods become fixtures before the completion
of the construction. To the extent given to refinance a
construction mortgage, the conflicting interest of an encumbrancer
of the real estate under a mortgage has this priority to
the same extent as the encumbrancer of the real estate
under the construction mortgage.
(7) In cases not within the preceding
subsections, priority between the interest of a lessor of fixtures,
including the lessor's residual interest, and the conflicting interest
of an encumbrancer or owner of the real estate who is not the lessee
is determined by the priority rules governing conflicting interests
in real estate.
(8) If the interest of a lessor
of fixtures, including the lessor's residual interest, has priority
over all conflicting interests of all owners and encumbrancers
of the real estate, the lessor or the lessee may (i) on default,
expiration, termination, or cancellation of the lease agreement
but subject to the lease agreement and this Article, or (ii) if
necessary to enforce other rights and remedies of the lessor or
lessee under this Article, remove the goods from the real estate,
free and clear of all conflicting interests of all owners and encumbrancers
of the real estate, but the lessor or lessee must reimburse any
encumbrancer or owner of the real estate who is not the lessee
and who has not otherwise agreed for the cost of repair of any
physical injury, but not for any diminution in value of the real
estate caused by the absence of the goods removed or by any necessity
of replacing them. A person entitled to reimbursement may refuse
permission to remove until the party seeking removal gives adequate
security for the performance of this obligation.
(9) Even though the lease agreement
does not create a security interest, the interest of a lessor of
fixtures, including the lessor's residual interest, is perfected
by filing a financing statement as a fixture filing for leased
goods that are or are to become fixtures in accordance with the
relevant provisions of the Article on Secured Transactions (Article
9).
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/2A-310) (from Ch. 26, par. 2A-310)
Sec. 2A-310. Lessor's and
lessee's rights when goods become accessions.
(1) Goods are "accessions" when
they are installed in or affixed to other goods.
(2) The interest of a lessor or
a lessee under a lease contract entered into before the goods
became accessions is superior to all interests in the whole except
as stated in subsection (4).
(3) The interest of a lessor or
a lessee under a lease contract entered into at the time or after
the goods became accessions is superior to all subsequently acquired
interests in the whole except as stated in subsection (4) but
is subordinate to interests in the whole existing at the time
the lease contract was made unless the holders of such interests
in the whole have in writing consented to the lease or disclaimed
an interest in the goods as part of the whole.
(4) The interest of a lessor or
a lessee under a lease contract described in subsection (2) or
(3) is subordinate to the interest of:
(a) a buyer
in the ordinary course of business or a
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lessee in the ordinary course of business
of any interest in the whole acquired after the
goods became accessions; or
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(b)
a creditor with a security interest in the whole
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perfected before the lease contract
was made to the extent that the creditor makes
subsequent advances without knowledge of the lease
contract.
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(5) When under
subsections (2) or (3) and (4) a lessor or a lessee of
accessions holds an interest that is superior to all interests
in the whole, the lessor or the lessee may (a) on default,
expiration, termination, or cancellation of the lease contract
by the other party but subject to the provisions of the
lease contract and this Article, or (b) if necessary to
enforce his or her other rights and remedies under this
Article, remove the goods from the whole, free and clear
of all interests in the whole, but he or she must reimburse
any holder of an interest in the whole who is not the lessee
and who has not otherwise agreed for the cost of repair
of any physical injury but not for any diminution in value
of the whole caused by the absence of the goods removed
or by any necessity for replacing them. A person entitled
to reimbursement may refuse permission to remove until
the party seeking removal gives adequate security for the
performance of this obligation.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-311) (from Ch. 26,
par. 2A-311)
Sec. 2A-311. Priority subject
to subordination. Nothing in this Article prevents subordination
by agreement by any person entitled to priority.
(Source: P.A. 87-493.)
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