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F I S C A L I M P A C T R E P O R T

SPONSOR HHGAC

ORIGINAL DATE

LAST UPDATED

3/5/2007

HB 1275/HHGACS

SHORT TITLE Lease or Rental Contract Jurisdiction

SB

ANALYST Schuss

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

Unknown Unknown Unknown Recurring General

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Administrative Office of the Courts (AOC)

Attorney General’s Office (AGO)

SUMMARY

Synopsis of Bill

The House, Health and Government Affairs Committee substitute for House Bill 1275 amends

and adds new material to the Uniform Commercial Code Section 55-24-1 NMSA 1978 regarding

lease and rental agreements.

If a consumer lease requires arbitration or mediation, the forum for these proceedings cannot be

outside the state of residence of the lessee.

House Bill 1275/ HHGACS – Page

2

The committee substitute defines “lease or rental contract for equipment" as any public, private,

foreign, or domestic contract or agreement relating to the temporary use of equipment without

transfer of ownership. “Indemnify" or “hold harmless" is defined as any requirement to name

the indemnified party as an additional insured on the indemnitor’s insurance coverage for the

purpose of providing indemnification for any liability not otherwise allowed in the section.

It is void and unenforceable for a lease or rental contract for equipment to require a party to the

agreement to indemnify, hold harmless, insure, or defend the other party to the agreement against

any liability, claims or damages for the negligence, act or omission of the indemnitee or the

indemnitor.

The provisions of the committee substitute do not apply to:

•

Leases or rental contracts for a motor vehicle,

•

Security agreements (Section 55-9-102 NMSA 1978),

•

Finance leases (Section 55-9-2A-103 NMSA 1978), or

•

Lease or rental contract for equipment for use in the production of motion pictures or

television.

FISCAL IMPLICATIONS

AOC notes that any fiscal impact on the judiciary would be proportional to increase in lease

disputes heard in New Mexico’s courts. There may be an increase in the amount of work that

needs to be done by the courts, thus requiring additional resources to handle increase.

SIGNIFICANT ISSUES

AGO has included the following in their analysis:

The substitute bill would enact provisions rendering the choice of a “forum" for purposes

of arbitration or mediation hearings in a consumer goods lease invalid if that forum is not the

residence of the consumer, or “lessee". Current law provides that if the judicial forum chosen by

the parties to a consumer lease is a forum that would not otherwise have jurisdiction over the

lessee, the choice is not enforceable. NMSA Section 55-2A-106(2). The substitute bill ties

arbitration and mediation hearing forums to the residence of the lessee; current law ties the

judicial forum to “jurisdiction over the lessee", which is a broader concept. A consumer might

maintain their residence outside of a forum, but still be subject to the jurisdiction of that forum.

With respect to the indemnification provisions, current law contains similar provisions

governing construction contracts. NMSA Section 56-7-1.

BS/nt