UCC Article 9
2/26/2008 5:12:21 PM EST
Why Creditors Should Search and File Against Fixtures in Both the Real Estate and UCC Filing Systems
Professor of Law, Indiana University School of Law
If you are perfecting a security interest in a fixture, searching and filing in the U.C.C. office, in addition to the county real estate records, can avoid unwelcome surprises. A creditor who finances fixtures may believe that searching and filing only in the real estate records is sufficient to protect its interest in the collateral. There are several reasons why this could be a mistake. This Commentary discusses the perfection of security interests in fixtures in both the real estate and U.C.C. filing systems.
Mr. Nehf writes: “The law relating to fixtures is complex because fixtures are both personal property and part of the real estate. As result, interests in fixtures can arise under both sets of laws. Article 9 recognizes this problem, and provides that a creditor can perfect a security interest in fixtures by making a ‘fixture filing’ in the local real estate records. The principal benefit of a fixture filing is that it is effective against real estate claimants. Under U.C.C. § 9-334, a fixture filing will have priority over later-filed mortgages and later acquired ownership rights in the land, essentially a ‘first in time’ rule against competing real estate claimants. U.C.C. § 9-334(e)(1). Even against existing mortgagees and owners of the real estate, if the creditor takes a purchase money security interest before the goods become fixtures and makes a fixture filing within 20 days after they become fixtures, the creditor will have priority over earlier recorded mortgages and existing owner ship interests.”
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