70A-2a-309 - Lessor's and lessee's rights when goods become fixtures.
70A-2a-309. Lessor's and lessee's rights when goods become fixtures.
(1) In this section:
(a) goods are "fixtures" when they become so related to particular real estate that aninterest in them arises under real estate law;
(b) a "fixture filing" is the filing, in the office where a record of a mortgage on the realestate would be filed, recorded, or registered, of a financing statement covering goods that are orare to become fixtures and conforming to the requirements of Subsections 70A-9a-502(1) and(2);
(c) a lease is a "purchase money lease" unless the lessee has possession or use of thegoods or the right to possession or use of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it secures an obligation incurredfor the construction of an improvement on land including the acquisition cost of the land, if therecorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other liens on real estate and allother rights in real estate that are not ownership interests.
(2) Under this chapter, a lease may be of goods that are fixtures or may continue in goodsthat become fixtures, but no lease exists under this chapter of ordinary building materialsincorporated into an improvement on land.
(3) This chapter does not prevent creation of a lease of fixtures pursuant to real estatelaw.
(4) The perfected interest of a lessor of fixtures has priority over a conflicting interest ofan encumbrancer or owner of the real estate if:
(a) the lease is a purchase money lease, the conflicting interest of the encumbrancer orowner arises before the goods become fixtures, a fixture filing covering the fixtures is filed orrecorded before the goods become fixtures or within 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 fixture filing before the interest of theencumbrancer or owner is of record, the lessor's interest has priority over any conflicting interestof a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record inthe real estate or is in possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not perfected, has priority over theconflicting interest of an encumbrancer or owner of the real estate if:
(a) the fixtures are readily removable factory or office machines, readily removableequipment that is not primarily used or leased for use in the operation of the real estate, or readilyremovable replacements of domestic appliances that are goods subject to a consumer lease, andbefore the goods become fixtures the lease contract is enforceable;
(b) the conflicting interest is a lien on the real estate obtained by legal or equitableproceedings after the lease contract is enforceable;
(c) the encumbrancer or owner has consented in writing to the lease or has disclaimed aninterest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against the encumbrancer or owner. Ifthe lessee's right to remove terminates, the priority of the interest of the lessor continues for areasonable time.
(6) Notwithstanding Subsection (4)(a), but otherwise subject to Subsections (4) and (5),the interest of a lessor of fixtures is subordinate to the conflicting interest of an encumbrancer of
the real estate under a construction mortgage recorded before the goods become fixtures if thegoods become fixtures before the completion of the construction. To the extent given torefinance a construction mortgage, the conflicting interest of an encumbrancer of the real estateunder a mortgage has this priority to the same extent as the encumbrancer of the real estate underthe construction mortgage.
(7) In cases not within the preceding subsections, priority between the interest of a lessorof fixtures, including the lessor's residual interest, and the conflicting interest of an encumbranceror owner of the real estate 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 the lessor's residual interest, haspriority over all conflicting interests of all owners and encumbrances of the real estate, the lessoror the lessee may:
(a) on default, expiration, termination, or cancellation of the lease agreement but subjectto the lease agreement and this chapter; or
(b) if necessary to enforce other rights and remedies of the lessor or lessee under thischapter, remove the goods from the real estate, free and clear of all conflicting interests of allowners and encumbrances of the real estate, but the lessor or lessee must reimburse anyencumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreedfor the cost of repair of any physical injury, but not for any diminution in value of the real estatecaused by the absence of the goods removed or by any necessity of replacing them. A personentitled to reimbursement may refuse permission to remove the goods until the party seekingremoval gives adequate security for the performance of this obligation.
(9) Even though the lease agreement does not create a security interest, the interest of alessor of fixtures, including the lessor's residual interest, is perfected by filing a financingstatement as a fixture filing for leased goods that are or are to become fixtures in accordance withthe relevant provisions of Title 70A, Chapter 9a, Uniform Commercial Code -- SecuredTransactions.
Amended by Chapter 252, 2000 General Session