How is a security interest in lease payments typically perfected?

• A. By including an assignment of the lease and, if needed, taking control of the lessee's accounts or receiving the payments directly per the agreement.
• B. By physically possessing the leased asset.
• C. By using a general lien on all assets of the borrower.
• D. By filing a UCC-3 only.

Answer: (A)

Perfection of a security interest in lease payments comes from securing the right to receive the payments themselves and, if needed, taking control of the payment flow. The typical approach is to include an assignment of the lease and, as appropriate, obtain control of the lessee’s accounts or receive the payments directly under the agreement. This puts the secured party in a position to collect the payments first and enforce the interest against the lessee and others.

Taking possession of the physical leased asset does not give you rights to the ongoing lease payments, so it doesn’t perfect the security interest in the payment stream. A general lien on all assets is too broad and does not specifically perfect the lien on the lease payments themselves. And a UCC-3 form alone doesn’t establish perfection; perfection generally requires an initial filing and/or control arrangements under the Article 9 framework.