Fixtures (and Secured Transactions) Flashcards
What is a fixture?
A fixture is something that was personal property that has become affixed to the real property.
What are some examples of fixtures?
Ceiling fan, HVAC unit, furnace, fancy refrigerator (connected to water line), light fixture
Where do fixtures issues arise?
In a fight to determine who has priority between the secured part and the real estate encumbrancer.
What is collateral?
Creditors loan money or extend credit to debtors. To secure their risk, creditors ask for collateral to secure the loan. Collateral is the thing the bank gets to take – generally something valuable.
What does it mean to be fully collateralized?
That the amount owed is equal to the value of the collateral.
What happens if the collateral ends up being more valuable than the amount of the debt owed?
The bank would haveto return the equity
What are security interests?
To solidify their rigths in the collateral, creditors obtain security interests in debtor’s property. This is usually done by signing a security agreement with the debtor and following Article 9 rules for attachment. The security interest allows the creditor to repossess the collateral if the debtor defaults.
In priority battles, what is priority usually based on?
The first to file (a financing statement or fixture filing) or to perfect
What is collateral classification?
The collateral is classified so that you know how to perfect. It is the debtor’s announced use of the collateral that determines its classification. As long as the creditor is relying in good faith on debtor’s representations, it does not matter that the nature of the use of the property has changed subsequent to signing the security agreement.
What is the security agreement?
The contract between the debtor and creditor
What are the five general points to a security agreement?
- Consumer 1-2 pages, Business 100 pages
- Governs the relationship between the debtor and creditor
- Not usually filed
- Collateral description cannot be super generic
- Creditor wants debtor to check the box (whether consumer goods, equipment, or inventory). Creditor is enttiled to rely upon the box checked, even if the use changes.
When is a financing statement sufficient?
Only if it (1) provides the name of the debtor, (2) provides the name of the secured party or a representative of the secured party, and (3) indicates the collateral covered by the financing statement.
What are the 7 points about financing statements?
- One page form
- Filed at UCC office
- Provides notice to the world of creditor’s interest
- Can be super generic in description of collateral
- Be careful of debtor’s name
- Make sureto file in correct location
- Can be filed before attachment is complete
What does filing a financing statement do?
It saves the place in line in a priority battle. When attachment isdone, it relates back to the date of filing of the financing statement.
What is a fixture filing? What does it require? (4)
It’s a financing statement for fixtures. It requires the financing statement requirements AND (1) indicate that it covers this type of colleteral, (2) indicates that it is to be filed for record in the real property records; (3) provide a sufficient description of th real property to which the collateral is related; and (4) if the debtor does not have an interest of record int he real property, provide the name of a record owner.
