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This entry was published on 2018-08-31
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SECTION 7-101
Money deposited or advanced for use or rental of personal property; waiver void
General Obligations (GOB) CHAPTER 24-A, ARTICLE 7, TITLE 1
§ 7-101. Money deposited or advanced for use or rental of personal
property; waiver void. 1. Whenever money shall be deposited or advanced
on a contract for the use or rental of personal property as security for
performance of the contract or to be applied to payments upon such
contract when due, such money, with interest accruing thereon, if any,
until repaid or so applied, shall continue to be the money of the person
making such deposit or advance and shall be a trust fund in the
possession of the person with whom such deposit or advance shall be made
and shall be deposited in a bank or trust company and shall not be
mingled with other funds or become an asset of such trustee, excepting,
however, that such trust funds may be deposited with other funds that
have been deposited or advanced to the trustee as security for
performance of a contract for the use or rental of personal property or
be applied to payments upon such contract when due. If the money being
deposited or advanced is for the use or rental of personal property and
the money deposited or advanced is seven hundred fifty dollars or more
and is for the use or rental of personal property for a period equal to
or greater than one hundred twenty days, the person receiving such money
shall deposit it pursuant to the provisions of subdivision one-a of this
section.

1-a. Whenever the money so deposited or advanced is seven hundred
fifty dollars or more and is for the use or rental of personal property
for a period equal to or greater than one hundred twenty days, the
person receiving such money shall, subject to the provisions of this
section, deposit it in an interest bearing account in a banking
organization within the state which account shall earn interest at a
rate which shall be the prevailing rate earned by other such deposits
made with banking organizations in such area. Such person shall not be
required to keep the funds of the separate persons from whom security
deposits or advances have been received in separate depository accounts,
provided his books of account shall clearly show the allocation of the
funds deposited in his general or special depository account. The person
depositing such security money shall be entitled to receive, as
administration expenses, a sum equivalent to one per cent per annum upon
the security money so deposited, which shall be deducted from the
interest earned on such security money from the banking organization and
shall be in lieu of all other administrative and custodial expenses
relating to the security deposit or advance. The balance of the interest
paid by the banking organization shall be the money of the lessee making
the deposit or advance and shall either be held in trust by the person
with whom such deposit or advance shall be made, until repaid or applied
for the use or rental of the personal property, or annually paid to the
lessee making the deposit of security money.

1-b. This section shall not be applicable to any advance payment of
money under or with respect to any contract for the use or rental of
personal property that, in accordance with the terms applicable to such
payment, either (a) is not revocable by the person making such payment
and is not otherwise subject to being returned or refunded to such
person, or (b) otherwise satisfies or discharges an equivalent liability
under such contract when such payment is made, whether or not such
liability is otherwise then due and payable under the terms of such
contract.

1-c. This section shall apply to money deposited or advanced on
contracts for the use or rental of personal property as security for
performance of the contract or to be applied to payments upon such
contract when due, only if (a) such contract is governed by the laws of
this state as the result of a choice of law provision in such contract,
in accordance with section 1--301 of the uniform commercial code
(subject to the limitations on choice of law by the parties to a
consumer lease under section 2-A-106 of the uniform commercial code), or
such contract is otherwise governed by the laws of this state in
accordance with applicable conflict of laws rules, and (b) the lessee
under such contract is located within this state, within the meaning of
the uniform commercial code (with respect to the location of debtors),
except that a foreign air carrier under the Federal Aviation Act of
1958, as amended, shall not be deemed located in this state solely as a
result of having a designated office of an agent upon whom service of
process may be made located in this state.

2. Any provision of a contract whereby a person who has deposited or
advanced money on a contract for the use or rental of personal property
as security for the performance of the contract waives any provision of
this section is absolutely void.

3. This section shall not be applicable to any deposit or advance of
money made in connection with the borrowing of securities for any lawful
purpose.