Leases and Security Interests

In attempting to speak with state level representatives, I learned two key points right up front. First, trying to get an appointment with them, even when you’re a constituent, is not an easy thing to do as they are very busy. Second, catching them walking out of a hearing that you just sat in on and walking along side them as they move onto their next meeting gets you the opportunity for valuable face time that you would otherwise have needed to wait two and a half weeks for.

I chose to speak with Jamie Pederson, State Senator for the 43rd Legislative District (Capitol Hill) about his proposed Senate Bill 5032 that further restricted the ability of a lease to become a security interest. My objective for this meeting was two-fold, one I wanted to better understand from the Senators perspective why this addition was necessary, and two I wanted to recommend that the new addition include language that would add appraisals to the list of reasons why a lease wouldn’t count as a security interest. The section and subsection of the bill that are affected are as follows:

(c) A transaction in the form of a lease does not create a security interest merely because:

(7) The amount of rental payments may or will be increased or decreased by reference to the amount realized by the lessor upon sale or disposition of the goods.

In speaking with Senator Pederson, he made it clear to me that he was recommending this because it had originally been included in this section of the code, but was unintentionally removed several years ago when the code was updated. Thus he viewed this as simply setting right something that had accidentally been broken. He also viewed this as affecting commercial vehicles and storage units more so than standard real estate property rights. I then informed Senator Pederson that I thought that it would make sense to amend the term to read:

(7) The amount of rental payments may or will be increased or decreased by reference to the amount realized by the lessor upon sale, disposition or appraisal of the goods.

I felt that this would be a good addition to the bill as it would now cover more major valuation events during the ownership of a good or property, and would further enable the lessor to fluctuate the required rental payments without creating a security interest. Senator Pederson thought this was interesting, but felt that it was likely unnecessary for the bill once the language he proposed was implemented.

All in all, I felt that this was a great experience for several reasons. First, while I have worked in Olympia before as a broker, I had never taken the opportunity to visit the Capital buildings, and sit in on the process that governs our day-to-day lives. Second, it was quite the experience to get to not only see how our state government functions, but to be able to speak with and offer advice to my State Senator. And last but not least, this interaction has piqued my interest in participating a little more actively in local government now that I know how much of a direct effect I can have on it.

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