§ 6A-2.1-309 - Lessor's and lessee's rights when goods become fixtures.
SECTION 6A-2.1-309
§ 6A-2.1-309 Lessor's and lessee's rightswhen goods become fixtures. – (1) In this section:
(a) Goods are "fixtures" when they become so related toparticular real estate that an interest in them arises under real estate law;
(b) A "fixture filing" is the filing, in the office where arecord of a mortgage on the real estate would be filed or recorded, of afinancing statement covering goods that are or are to become fixtures andconforming to the requirements of § 6A-9-502(a) and (b);
(c) A lease is a "purchase money lease" unless the lessee haspossession or use of the goods or the right to possession or use of the goodsbefore the lease agreement is enforceable;
(d) A mortgage is a "construction mortgage" to the extent itsecures an obligation incurred for the construction of an improvement on landincluding the acquisition cost of the land, if the recorded writing soindicates; and
(e) "Encumbrance" includes real estate mortgages and otherliens on real estate and all other rights in real estate that are not ownershipinterests.
(2) Under this chapter a lease may be of goods that arefixtures or may continue in goods that become fixtures, but no lease existsunder this chapter of ordinary building materials incorporated into animprovement on land.
(3) This chapter does not prevent creation of a lease offixtures pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures haspriority over a conflicting interest of an encumbrancer or owner of the realestate if:
(a) The lease is a purchase money lease, the conflictinginterest of the encumbrancer or owner arises before the goods become fixtures,the interest of the lessor is perfected by a fixture filing before the goodsbecome fixtures or within ten (10) days thereafter, and the lessee has aninterest of record in the real estate or is in possession of the real estate; or
(b) The interest of the lessor is perfected by a fixturefiling before the interest of the encumbrancer or owner is of record, thelessor's interest has priority over any conflicting interest of a predecessorin title of the encumbrancer or owner, and the lessee has an interest of recordin the real estate or is in possession of the real estate.
(5) The interest of a lessor of fixtures, whether or notperfected, has priority over the conflicting interest of an encumbrancer orowner of the real estate if:
(a) The fixtures are readily removable factory or officemachines, readily removable equipment that is not primarily used or leased foruse in operation of the real estate, or readily removable replacements ofdomestic appliances that are goods subject to a consumer lease, and before thegoods become fixtures the lease contract is enforceable; or
(b) The conflicting interest is a lien on the real estateobtained by legal or equitable proceedings after the lease contract isenforceable; or
(c) The encumbrancer or owner has consented in writing to thelease or has disclaimed an interest in the goods as fixtures; or
(d) The lessee has a right to remove the goods as against theencumbrancer or owner. If the lessee's right to remove terminates, the priorityof the interest of the lessor continues for a reasonable time.
(6) Notwithstanding subsection (4)(a), but otherwise subjectto subsections (4) and (5), the interest of a lessor of fixtures, including thelessor's residual interest, is subordinate to the conflicting interest of anencumbrancer of the real estate under a construction mortgage recorded beforethe goods become fixtures if the goods become fixtures before the completion ofthe construction. To the extent given to refinance a construction mortgage, theconflicting interest of an encumbrancer of the real estate under a mortgage hasthis priority to the same extent as the encumbrancer of the real estate underthe construction mortgage.
(7) In cases not within the preceding subsections, prioritybetween the interest of a lessor of fixtures, including the lessor's residualinterest, and the conflicting interest of an encumbrancer or owner of the realestate who is not the lessee is determined by the priority rules governingconflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including thelessor's residual interest, has priority over all conflicting interests of allowners and encumbrancers of the real estate, the lessor or the lessee may (i)on default, expiration, termination, or cancellation of the lease agreement butsubject to the lease agreement and this chapter, or (ii) if necessary toenforce other rights and remedies of the lessor or lessee under this chapter,remove the goods from the real estate, free and clear of all conflictinginterests of all owners and encumbrancers of the real estate, but the lessor orlessee must reimburse any encumbrancer or owner of the real estate who is notthe lessee and who has not otherwise agreed for the cost of repair of anyphysical injury, but not for any diminution in value of the real estate causedby the absence of the goods removed or by any necessity of replacing them. Aperson entitled to reimbursement may refuse permission to remove until theparty seeking removal gives adequate security for the performance of thisobligation.
(9) Even though the lease agreement does not create asecurity interest, the interest of a lessor of fixtures, including the lessor'sresidual interest, is perfected by filing a financing statement as a fixturefiling for leased goods that are or are to become fixtures in accordance withthe relevant provisions of the chapter on secured transactions (chapter 9 oftitle 6).