Cal. Financial Code - FIN § 7700.3. Section 7700.3.
An association may engage in leasing activities that are the functional equivalent of lending, subject to the limitations of Sections 7701 to 7704, inclusive.
ARTICLE 10. Finance Leasing [7700.3. - 7704.]
Cal. Financial Code - FIN 10.
in effectCal. Financial Code - FIN § 7701. Section 7701.
An association may become the legal or beneficial owner of tangible personal property or real property for the purpose of leasing such property, may obtain an assignment of a lessor’s interest in a lease of such property, and may incur obligations incidental to its position as the legal or beneficial owner and lessor of the leased property, if:
(1)
The lease is a net, full-payout lease representing a noncancelable obligation of the lessee, notwithstanding the possible early termination of the lease.
(2)
At the expiration of the lease, the association’s interest in the property shall be liquidated or released on a net basis as soon as practicable.
Cal. Financial Code - FIN § 7702. Section 7702.
(a)
A lease of tangible personal property made to a natural person for personal, family, or household purposes pursuant to this section shall be subject to all limitations applicable to the amount of an association’s investment in consumer loans.
(b)
A lease made for commercial, corporate, business, or agricultural purposes pursuant to this section shall be subject to all limitations applicable to the amount of an association’s investment in commercial loans.
(c)
A lease of
residential or nonresidential real property made pursuant to this section shall be subject to all limitations applicable to the amount of an association’s investment in real estate loans.
Cal. Financial Code - FIN § 7703. Section 7703.
For the purposes of this article:
(a)
A “net lease” is a lease under which the association will not, directly or indirectly, provide or be obligated to provide for:
(1)
The servicing, repair, or maintenance of the leased property during the lease term.
(2)
The purchasing of parts and accessories for the leased property; provided that improvements and additions to the leased property may be leased to the lessee upon its request in
accordance with the full pay-out requirement of this section.
(3)
The loan of replacement or substitute property while the leased property is being serviced.
(4)
The purchasing of insurance for a lessee, except where the lessee has failed to discharge a contractual obligation to purchase or maintain insurance.
(5)
The renewal of any license, registration, or filing for the property unless such action by the association is necessary to protect its interest as an owner or financer of the property.
(b)
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, from rentals, estimated tax benefits,
and the estimated residual value of the property at the expiration of the initial term of the lease; provided that no more than 20 percent of the return may be realized from the residual value of the property at the expiration of the initial term of the lease. 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 in light of the nature of the leased property and all relevant circumstances so that realization of the lessor’s full investment plus the cost of financing the property depends primarily on the creditworthiness of the lessee, and not on the residual market value of the leased property. The maximum term of a full-payout lease shall be 40 years.
Cal. Financial Code - FIN § 7704. Section 7704.
If, in good faith, an association believes that there has been an unanticipated change in conditions that threatens its financial position by significantly increasing its exposure to loss, the provisions of Sections 7702 and 7703 of this article shall not prevent the association:
(a)
As the owner and lessor under a net, full pay-out lease, from taking reasonable and appropriate action to salvage or protect the value of the property or its interest arising under the lease.
(b)
As the assignee of a
lessor’s interest in a lease, from becoming the 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 interest arising under the lease.
(c)
From including any provisions in a lease, or from making any additional agreements, to protect its financial position or investment in the circumstances set forth in subdivisions (a) and (b) of this section.
Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026