(1) Subject to KRS 355.2A-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 subsection
(2) of this section and subsection (4) of KRS 355.2A-527, takes subject to the existing lease contract. 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 the
preceding sentence. If goods have been delivered under a transaction of purchase, the lessor has that
power even though:
(a) The lessor's transferor was deceived as to the identity of the lessor;
(b) The delivery was in exchange for a check which is later dishonored;
(c) It was agreed that the transaction was to be a “cash sale”; or
(d) The delivery was procured through fraud punishable as larcenous under the criminal
(2) A subsequent lessee in the 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.
(3) A subsequent lessee from the lessor of goods that are subject to an existing
lease contract and 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
both by this section and by the certificate of title statute.
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