Chapter 411

411.303(1) (1) In this section, “creation of a security interest” includes the sale of a lease contract that is subject to ch. 409 under s. 409.109 (1) (c).

411.303(2) (2) Except as provided in sub. (3) and s. 409.407, a provision in a lease agreement that prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of an interest of a party under the lease contract or of the lessor’s residual interest in the goods, or that makes such a transfer an event of default, gives rise to the rights and remedies provided in sub. (4), but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.

411.303(3) (3) A provision in a lease agreement that prohibits a transfer of a right to damages for default with respect to the whole lease contract or of a right to payment arising out of the transferor’s due performance of the transferor’s entire obligation, or that makes such a transfer an event of default, is not enforceable, and such a transfer is not a transfer that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract within the purview of sub. (4).

411.303(4) (4) Subject to sub. (3) and s. 409.407:

411.303(4)(a) (a) If a transfer is made which is made an event of default under a lease agreement, the party to the lease contract not making the transfer, unless that party waives the default or otherwise agrees, has the rights and remedies under s. 411.501 (2).

411.303(4)(b) (b) If par. (a) is not applicable and if a transfer is made that is prohibited under a lease agreement or that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on the other party to the lease contract, unless the party not making the transfer agrees at any time to the transfer in the lease contract or otherwise, then, except as limited by contract, all of the following apply:

411.303(4)(b)1. 1. The transferor is liable to the party not making the transfer for damages caused by the transfer to the extent that the damages could not reasonably be prevented by the party not making the transfer.

411.303(4)(b)2. 2. A court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer.

411.303(5) (5) A transfer of “the lease” or of “all my rights under the lease”, or a transfer in similar general terms is a transfer of rights and, unless the language or the circumstances, as in a transfer for security, indicate the contrary, the transfer is a delegation of duties by the transferor to the transferee. Acceptance by the transferee constitutes a promise by the transferee to perform those duties. The promise is enforceable by either the transferor or the other party to the lease contract.

411.303(6) (6) Unless otherwise agreed by the lessor and the lessee, a delegation of performance does not relieve the transferor as against the other party of any duty to perform or of any liability for default.

411.303(7) (7) In a consumer lease, to prohibit the transfer of an interest of a party under the lease contract or to make a transfer an event of default, the language must be specific, by a writing and conspicuous.

411.303 History History: 1991 a. 148; 2001 a. 10.

411.304 411.304 Subsequent lease of goods by lessor.

411.304(1) (1) 

411.304(1)(a) (a) Subject to s. 411.303, a subsequent lessee from a lessor of goods under an existing lease contract obtains, to the extent of the leasehold interest transferred, the leasehold interest in the goods that the lessor had or had power to transfer, and except as provided in sub. (2) and s. 411.527 (4), takes subject to the existing lease contract.

411.304(1)(b) (b) A lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, but only to the extent set forth in par. (a).

411.304(1)(c) (c) If goods have been delivered under a transaction of purchase, the lessor has that power even if any of the following occurs:

411.304(1)(c)1. 1. The lessor’s transferor was deceived as to the identity of the lessor.

411.304(1)(c)2. 2. The delivery was in exchange for a check that is later dishonored.

411.304(1)(c)3. 3. It was agreed that the transaction was to be a cash sale.

411.304(1)(c)4. 4. The delivery was procured through fraud and is punishable under s. 943.20 or 943.34.

411.304(2) (2) A subsequent lessee in ordinary course of business from a lessor who is a merchant dealing in goods of that kind to whom the goods were entrusted by the existing lessee of that lessor before the interest of the subsequent lessee became enforceable against that lessor obtains, to the extent of the leasehold interest transferred, all of that lessor’s and the existing lessee’s rights to the goods, and takes free of the existing lease contract.

411.304(3) (3) A subsequent lessee from the lessor of goods that are subject to an existing lease contract and that are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided by this section and by the certificate of title statute.

411.304 History History: 1991 a. 148.

411.305 411.305 Sale or sublease of goods by lessee.

411.305(1) (1) 

411.305(1)(a) (a) Subject to s. 411.303, a buyer or sublessee from the lessee of goods under an existing lease contract obtains, to the extent of the interest transferred, the leasehold interest in the goods that the lessee had or had power to transfer, and, except as provided in sub. (2) and s. 411.511 (4), takes subject to the existing lease contract.

411.305(1)(b) (b) A lessee with a voidable leasehold interest has power to transfer a good leasehold interest to a good faith buyer for value or a good faith sublessee for value, but only to the extent set forth in par. (a).

411.305(1)(c) (c) When goods have been delivered under a transaction of lease the lessee has that power even if any of the following occurs:

411.305(1)(c)1. 1. The lessor was deceived as to the identity of the lessee.

411.305(1)(c)2. 2. The delivery was in exchange for a check that is later dishonored.

411.305(1)(c)3. 3. The delivery was procured through fraud and is punishable under s. 943.20 or 943.34.

411.305(2) (2) A buyer in ordinary course of business or a sublessee in ordinary course of business from a lessee who is a merchant dealing in goods of that kind to whom the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the lessor’s and lessee’s rights to the goods, and takes free of the existing lease contract.

411.305(3) (3) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and that are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided by this section and by the certificate of title statute.

411.305 History History: 1991 a. 148.

411.306 411.306 Priority of certain liens arising by operation of law. If a person in the ordinary course of his or her business furnishes services or materials with respect to goods subject to a lease contract, a lien upon those goods in the possession of that person given by statute or rule of law for those materials or services takes priority over any interest of the lessor or lessee under the lease contract or this chapter unless the lien is created by statute and the statute provides otherwise or unless the lien is created by rule of law and the rule of law provides otherwise.

411.306 History History: 1991 a. 148.

411.307 411.307 Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.

411.307(1) (1) Except as provided in s. 411.306, a creditor of a lessee takes subject to the lease contract.

411.307(2) (2) Except as provided in sub. (3) and ss. 411.306 and 411.308, a creditor of a lessor takes subject to the lease contract unless the creditor holds a lien that attached to the goods before the lease contract became enforceable.

411.307(3) (3) Except as otherwise provided in ss. 409.317, 409.321, and 409.323, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.

411.307 History History: 1991 a. 148; 2001 a. 10.

411.308 411.308 Special rights of creditors.

411.308(1) (1) A creditor of a lessor in possession of goods subject to a lease contract may treat the lease contract as void if as against the creditor retention of possession by the lessor is fraudulent under any statute or rule of law, but retention of possession in good faith and current course of trade by the lessor for a commercially reasonable time after the lease contract becomes enforceable is not fraudulent.

411.308(2) (2) Nothing in this chapter impairs the rights of a creditor of a lessor if all of the following occur:

411.308(2)(a) (a) The lease contract becomes enforceable, not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like.

411.308(2)(b) (b) The lease contract is made under circumstances that under any statute or rule of law apart from this chapter would constitute the transaction a fraudulent or voidable transfer or voidable preference.

411.308(3) (3) A creditor of a seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor retention of possession by the seller is fraudulent under any statute or rule of law, but retention of possession of the goods under a lease contract entered into by the seller as lessee and the buyer as lessor in connection with the sale or identification of the goods is not fraudulent if the buyer bought for value and in good faith.

411.308 History History: 1991 a. 148; 2023 a. 246.

411.309 411.309 Lessor’s and lessee’s rights when goods become fixtures.

411.309(1) (1) In this section:

411.309(1)(a) (a) “Construction mortgage” means a mortgage that secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land, if the recorded writing so indicates.

411.309(1)(b) (b) “Encumbrance” includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests.

411.309(1)(c) (c) “Fixture filing” means a filing, in the office where a record of a mortgage on real estate would be filed or recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of s. 409.502 (1) and (2).

411.309(1)(d) (d) “Fixtures” means goods that become so related to particular real estate that an interest in them arises under real estate law.

411.309(1)(e) (e) “Purchase money lease” means a lease unless the lessee has possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable.

411.309(2) (2) Under this chapter a lease may be of goods that are fixtures or may continue in goods that become fixtures, but no lease exists under this chapter of ordinary building materials incorporated into an improvement on land.

411.309(3) (3) This chapter does not prevent creation of a lease of fixtures under real estate law.

411.309(4) (4) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if any of the following occurs:

411.309(4)(a) (a) The lease is a purchase money lease, the conflicting interest of the encumbrancer or owner arises before the goods become fixtures, the interest of the lessor is perfected by a fixture filing before the goods become fixtures or within 10 days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate.

411.309(4)(b) (b) The interest of the lessor is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the lessor’s interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real estate or is in possession of the real estate.

411.309(5) (5) The interest of a lessor of fixtures, whether or not perfected, has priority over the conflicting interest of an encumbrancer or owner of the real estate if any of the following applies:

411.309(5)(a) (a) The fixtures are readily removable factory or office machines, readily removable equipment that is not primarily used or leased for use in the operation of the real estate, or readily removable replacements of domestic appliances that are goods subject to a consumer lease, and before the goods become fixtures the lease contract is enforceable.

411.309(5)(b) (b) The conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable.

411.309(5)(c) (c) The encumbrancer or owner consents in writing to the lease or disclaims an interest in the goods as fixtures.

411.309(5)(d) (d) The lessee has a right to remove the goods as against the encumbrancer or owner. If the lessee’s right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.

411.309(6) (6) Notwithstanding sub. (4) (a) but otherwise subject to subs. (4) and (5), the interest of a lessor of fixtures, including the lessor’s residual interest, is subordinate to the conflicting interest of an encumbrancer of the real estate under a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent given to refinance a construction mortgage, the conflicting interest of an encumbrancer of the real estate under a mortgage has this priority to the same extent as the encumbrancer of the real estate under the construction mortgage.

411.309(7) (7) In cases not within subs. (2) to (6), priority between the interest of a lessor of fixtures, including the lessor’s residual interest, and the conflicting interest of an encumbrancer or owner of the real estate who is not the lessee is determined by the priority rules governing conflicting interests in real estate.

411.309(8) (8) If the interest of a lessor of fixtures, including the lessor’s residual interest, has priority over all conflicting interests of all owners and encumbrancers of the real estate, the lessor or the lessee may on default, expiration, termination, or cancellation of the lease agreement, but subject to the lease agreement and this chapter, or, if necessary to enforce other rights and remedies of the lessor or lessee under this chapter, remove the goods from the real estate, free and clear of all conflicting interests of all owners and encumbrancers of the real estate. The lessor or lessee shall reimburse any encumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in value of the real estate caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.

411.309(9) (9) Even though the lease agreement does not create a security interest, the interest of a lessor of fixtures, including the lessor’s residual interest, is perfected by filing a financing statement as a fixture filing for leased goods that are or are to become fixtures under ch. 409.

411.309 History History: 1991 a. 148; 2001 a. 10.

411.310 411.310 Lessor’s and lessee’s rights when goods become accessions.

411.310(1) (1) In this section, “accessions” means goods that are installed in or affixed to other goods.

411.310(2) (2) The interest of a lessor or a lessee under a lease contract entered into before the goods become accessions is superior to all interests in the whole except as provided in sub. (4).

411.310(3) (3) The interest of a lessor or a lessee under a lease contract entered into when or after the goods become accessions is superior to all subsequently acquired interests in the whole except as provided in sub. (4) but is subordinate to interests in the whole existing when the lease contract was made unless the holders of such interests in the whole consent in writing to the lease or disclaim in writing an interest in the goods as part of the whole.

411.310(4) (4) The interest of a lessor or a lessee under a lease contract described in sub. (2) or (3) is subordinate to the interest of any of the following:

411.310(4)(a) (a) A buyer in the ordinary course of business or a lessee in the ordinary course of business of any interest in the whole acquired after the goods become accessions.

411.310(4)(b) (b) A creditor with a security interest in the whole perfected before the lease contract is made to the extent that the creditor makes subsequent advances without knowledge of the lease contract.

411.310(5) (5) When under subs. (2) and (4) or under subs. (3) and (4) a lessor or a lessee of accessions holds an interest that is superior to all interests in the whole, the lessor or the lessee may on default, expiration, termination or cancellation of the lease contract by the other party but subject to the lease contract and this chapter, or if necessary to enforce his or her other rights and remedies under this chapter, remove the goods from the whole, free and clear of all interests in the whole, but he or she shall reimburse any holder of an interest in the whole who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury but not for any diminution in value of the whole caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.

411.310 History History: 1991 a. 148.

411.311 411.311 Priority subject to subordination. Nothing in this chapter prevents subordination by agreement by any person entitled to priority.

411.311 History History: 1991 a. 148.

subch. IV of ch. 411 SUBCHAPTER IV

PERFORMANCE OF LEASE CONTRACT:
REPUDIATED, SUBSTITUTED AND EXCUSED

411.401 411.401 Insecurity: adequate assurance of performance.

411.401(1) (1) A lease contract imposes an obligation on each party that the other’s expectation of receiving due performance shall not be impaired.

411.401(2) (2) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable the insecure party may suspend any performance for which he or she has not already received the agreed return.

411.401(3) (3) A repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed 30 days after receipt of a demand by the other party.

411.401(4) (4) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.