Priority: security interests in fixtures

Question 1

General rule

Answer 1

Generally, a security interest in fixtures is subordinate to an interest in real property.

Question 2

Purchase-money security interest in fixtures

Answer 2

If the holder of a PMSI in fixtures makes a fixture filing either:

• Before the goods become a fixture or
• Within 20 days,

the PMSI in the fixture takes priority over the security interest in the related real property.

Question 3

Fixture filing

Answer 3

A fixture filing must:

(1) Provide a description of the real property related to the collateral;
(2) Be filed as collateral related to real property:

• in the office for recording a mortgage on the property (a local filing)
• as opposed to with the secretary of state (central filing), which is the procedure for filing for other collateral.

Question 4

Construction mortgage

Answer 4

A construction mortgage is a mortgage:

(1) that secures an obligation:

• incurred for the construction of an improvement on land,
• including the cost of acquiring the land, and

(2) that indicates that it is a construction mortgage in the real property records.

Question 5

Construction mortgage: priority

Answer 5

A construction mortgage has priority over a subsequent security interest in a fixture—including PMSIs in fixtures—if:

• it is recorded before the goods become fixtures, but
• it only covers goods that become fixtures before completion of the construction.