When are leases covered by Article 9 of the UCC?

Leases are covered by Article 9 of the UCC when the transaction resembles a secured transaction. This encompasses situations where the lease is structured in such a way that it effectively provides the lessor with a security interest in the leased property. Under the UCC, the key element is that the lease must transfer rights to use and possess the property in a manner that resembles a security interest, typically when a lease is classified as a "security interest" lease because it meets specific criteria, such as the lessee having the option to purchase the leased property at the end of the lease term.

For instance, if the lease has terms that indicate a transfer of ownership or significant risks and rewards of ownership, it may be treated similarly to a secured transaction. This perspective allows lessors to perfect their security interests and assert them against third parties. The other choices focus on characteristics that are not determinative for coverage under Article 9, such as the nature of the property (real estate), the duration of the lease, or payment frequency, which do not inherently influence whether a lease resembles a secured transaction.