Fixtures

Question 1

Fixture - Definition

Answer 1

• goods that have become so related to real property that an interest in them arises under real property law
• in general, personal property attached to real estate w/ the intent that it become a permanent part of the real estate is a fixture (ex: central ac, built-in appliances, elevators, etc)

Question 2

Perfection

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 normal reqs, fixture filing statement must reasonably identify the real estate and must show the name of the owner (if debtor doesn’t have an interest of record in the real estate)

Question 3

Rights on Default

Answer 3

• when security interest in the fixture has priority over all interests in the real property, holder of security interest in the fixture may, upon default, remove the fixture from the real property
• if debtor doesn’t own the property from which the collateral is removed, creditor must reimburse owner for cost to repair damage to the property caused by removal, but not for any other diminution in value

Question 4

Priority - Secured Party vs. Subsequent Real Estate Interest

Answer 4

• security interest in fixtures has priority over any real estate interest that’s recorded subsequent to perfection of security interest by fixture filing

Question 5

Priority - Secured Party vs. Prior Real Estate Interest

Answer 5

• prior real estate interest that’s properly recorded has priority over security interest that subsequently arises

Exception: PMSI takes priority over an earlier in time realty interest if it’s perfected by a future filing before the goods become fixtures or w/in 20 days after

Question 6

Construction Mortgage

Answer 6

• takes priority over a subsequent PMSI in fixtures, even if the security interest is perfected by a fixture filing w/in 20 days of affixation

Question 7

Fixture Filings + Readily Removable Collateral

Answer 7

• secured party DOESN’T need fixture filing for readily removable:
  1) factory or office machines
  2) equipment that’s 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 take priority

Question 8

Consent, Disclaimer, or Right to Remove

Answer 8

• secured party need not perfect at all to have priority:
  1) if the encumbrance 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
  2) if debtor has a right to remove the goods as against the real estate claimant