Section 7703 Of Article 10. Finance Leasing From California Financial Code >> Division 2. >> Chapter 6. >> Article 10.
7703
. For the purposes of this article:
(a) A "net lease" is a lease under which the association will not,
directly or indirectly, provide or be obligated to provide for:
(1) The servicing, repair, or maintenance of the leased property
during the lease term.
(2) The purchasing of parts and accessories for the leased
property; provided that improvements and additions to the leased
property may be leased to the lessee upon its request in accordance
with the full pay-out requirement of this section.
(3) The loan of replacement or substitute property while the
leased property is being serviced.
(4) The purchasing of insurance for a lessee, except where the
lessee has failed to discharge a contractual obligation to purchase
or maintain insurance.
(5) The renewal of any license, registration, or filing for the
property unless such action by the association is necessary to
protect its interest as an owner or financer of the property.
(b) A "full-payout" lease is one from which the lessor can
reasonably expect to realize a return of its full investment in the
leased property, plus the estimated cost of financing the property
over the term of the lease, from rentals, estimated tax benefits, and
the estimated residual value of the property at the expiration of
the initial term of the lease; provided that no more than 20 percent
of the return may be realized from the residual value of the property
at the expiration of the initial term of the lease. Both the
estimated residual value of the property and that portion of the
estimated residual value relied upon by the lessor to satisfy the
requirements of a full-payout lease must be reasonable in light of
the nature of the leased property and all relevant circumstances so
that realization of the lessor's full investment plus the cost of
financing the property depends primarily on the creditworthiness of
the lessee, and not on the residual market value of the leased
property. The maximum term of a full-payout lease shall be 40 years.