Fixtures

Question 1

Fixture

Answer 1

Goods that have become so related to a particular real property that an interest arises under real property law

Question 2

Perfection of Fixtures

Answer 2

To perfect a security interest in fixtures, a “fixture filing” must be made in the office where a mortgage on the real estate would be filed. In addition to the usual requirements for a financing statement, a fixture filing financing statement must reasonably identify the real estate and must show the name of the owner (if the debtor does not have an interest of record in the real estate)

Question 3

Fixtures- Rights on Default

Answer 3

When the security interest in the fixture has priority over all interests in the real property, the holder of the security interest in the fixture may, upon default, remove the fixture from the real property.

Note: If the debtor does not own the property from which the collateral is removed, the creditor must reimburse the owner of the property for the cost to repair damage to the property caused by removal, but not for any other diminution in value.

Question 4

Fixtures- Priority of SP v subsequent real estate interest

Answer 4

General rule: A security interest in fixtures has priority over any real estate interest that arises subsequent to the perfection of the security interest by fixture filing.

Question 5

Fixtures- Priority of SP v prior real estate interest

Answer 5

General rule: A prior real estate interest that is properly recorded has priority over a security interest that subsequently arises.

Exception: A purchase money security interest takes priority over an earlier in time realty interest if it is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter Except in construction mortgage

Question 6

When Fixture Filing Unnecessary

Answer 6

A secured party need not fixture file as to readily removable (1) factory or office machines, or (2) equipment that is not primarily used or leased for use in the operation of the real estate, or (3) replacements of domestic appliances which are consumer goods. Any method of perfection before such goods become fixtures entitles the secured party to priority.

A secured party need not perfect at all to have priority if the encumbrancer or owner of the real estate has in an authenticated record consented to the security interest or has disclaimed an interest in the goods as fixtures, or if the debtor has a right to remove the goods as against the real estate claimant.