Who is the secured party in relation to the additional collateral?

• A. The lessee
• B. The secured party, who is the lessor
• C. The third party with an interest in the collateral
• D. The government

Answer: (B)

In secured financing, the secured party is the person who holds the security interest in the collateral and has the right to repossess or otherwise enforce that interest if the obligation isn’t met. When additional collateral is provided to back the same obligation in a lease arrangement, the party that holds and can enforce that security interest is the lessor. The lessee is the user of the asset and the party obligated to perform, but not the holder of the security interest in the collateral. A third party with an interest is only the secured party if they actually hold the security interest; otherwise they’re just another lienholder. The government is not typically the secured party in this context.