Section 13-03-19-03 - Lease requirements1. The lease must be a net lease. In a net lease, your member assumes all the burdens of ownership, including maintenance and repair, licensing and registration, taxes, and insurance. 2. The lease must be a full payout lease. In a full payout lease, you must reasonably expect to recoup your entire investment in the leased property, plus the estimated cost of financing, from the lessee's payments and the estimated residual value of the leased property at the expiration of the lease term. 3. The amount of the estimated residual value to satisfy the full payout lease requirement shall not exceed twenty-five percent of the original cost of the leased property unless the amount above twenty-five percent is guaranteed. Estimated residual value must be reasonable in light of the leased property and all circumstances relevant to the leasing arrangement. 4. When the credit union does not own the leased property in an indirect leasing arrangement, the credit union must: a. Obtain a full assignment of the lease. A full assignment is the assignment of all the rights, interests, obligations, and title in the lease. b. Be named as the sole lienholder of the leased property. c. Receive a security agreement, signed by the leasing company, granting the credit union a sole lien in the leased property and the right to take possession and dispose of the leased property in the event of a default by the lessee, a default in the leasing company's obligations to the credit union, or a material adverse change in the leasing company's financial condition. d. Take all necessary steps to record and perfect the credit union's security interest in the leased property. 5. The credit union must retain salvage powers over the leased property. 6. The credit union must maintain a contingent liability insurance policy with an endorsement for leasing or be named as the coinsured if the credit union does not own the leased property. The credit union must use an insurance company with a nationally recognized industry rating of at least a B+. 7. The credit union member must carry the normal liability and property insurance on the leased property. The credit union must be named as an additional insured on the liability insurance policy and as loss payee on the property insurance policy. N.D. Admin Code 13-03-19-03
Effective January 1, 2007.General Authority: NDCC 6-01-04
Law Implemented: NDCC 6-06-06