True Leases Caught By Ontario PPSA

Since the introduction of the PPSA in Ontario in 1976, the issue of whether a lease is a true lease or a security lease has generated more litigation and controversy than any other specific issue under the PPSA. How a lease is ultimately characterized can have serious consequences. If the lease is a true lease, then that lease is completely outside the scope of the PPSA. If the lease is a security lease in the sense that it secures the payment or performance of an obligation, then that lease falls completely within the scope of the PPSA. Unfortunately, unlike the Uniform Commercial Code, the PPSA provides virtually no guidance on when a lease will be considered to be a under the PPSA.