1151.349 Leasing activities.

(A) As used in this section:

(1) A "net lease" is a lease under which a savings and loan association, directly or indirectly, will not be obligated to:

(a) Service, repair, or maintain the leased property during the lease term;

(b) Purchase parts and accessories for the leased property; however, improvements and additions to the leased property may be leased to the lessee upon its request in accordance with the full-payout requirements of this section;

(c) Furnish replacement or substitute property while the leased property is being serviced;

(d) Purchase insurance for the lessee, unless the lessee has failed to purchase or maintain insurance required by contract;

(e) Renew any license or registration for the property unless such action is necessary to protect the association's interest as an owner or financer of the property.

(2) 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 derived from:

(a) Rentals;

(b) Estimated tax benefits; and

(c) The estimated residual value of the property when the initial term of the lease expires. However, no more than twenty per cent of the return may be realized from the residual value. 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 so that realization of the lessor's full investment, plus the cost of financing the property, primarily depends on the credit-worthiness of the lessee, and not on the residual market value of the leased item. The maximum term of a full-payout lease shall be forty years.

(B) In addition to the provisions of Chapter 1151. of the Revised Code regarding lending, a savings and loan association may also engage in leasing activities that are the functional equivalent of lending, subject to the following conditions. An association may:

(1) Become the legal or beneficial owner of tangible personal property or real property for the purpose of leasing such property; or

(2) Obtain an assignment of a lessor's interest in a lease of such property; and

(3) Incur obligations incidental to its position as the owner and lessor of the leased property, provided the lease is a net, full-payout lease representing a noncancelable obligation of the lessee. At the expiration of the lease the association shall liquidate, or release on a net basis, all interest in the property as soon as practicable.

(C) If an association believes that there has been an unanticipated change in conditions which threatens its financial position by significantly increasing its exposure to loss, divisions (A) and (B) of this section do not prevent the association:

(1) As owner and lessor under a net, full-payout lease, from taking reasonable and appropriate action to salvage or protect the value of the property or its interests arising under the lease; or

(2) As assignee of a lessor's interest in a lease, from becoming owner and lessor of the leased property pursuant to its contractual right, or from taking any reasonable and appropriate action to salvage or protect the value of the property or its interests arising under the lease; or

(3) From including any additional provisions or agreements in a lease, to protect its financial position or investment in the circumstances set forth in divisions (C)(1) and (2) of this section.

(D) A lease of tangible personal property made to a natural person for personal, family, or household purposes pursuant to this section is subject to all limitations applicable to the amount of an association's investment in consumer loans. A lease made for commercial, corporate, business, or agricultural purposes pursuant to this section is subject to all limitations applicable to the amount of an association's investment in commercial loans. A lease of residential or nonresidential real property made pursuant to this section is subject to all limitations applicable to the amount of an association's investment in real estate loans.

(E) In addition to the authority set forth in division (A) of this section, an association may also invest up to ten per cent of its assets in tangible personal property including, without limitation, vehicles, manufactured homes, mobile homes, machinery, equipment, or furniture for rental. The estimated residual value at the expiration of the initial term of the lease shall not exceed seventy per cent of the lessor's acquisition cost.

Cite as R.C. § 1151.349

History. Effective Date: 03-30-1999