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The Vermont Statutes Online



Title

09A

:
Uniform Commercial Code






Chapter

002A

:
Leases











 

§

2A-309. Lessor's and lessee's rights when goods become fixtures

(1) In this

section:

(a) goods are

"fixtures" when they become so related to particular real estate that

an interest in them arises under real estate law;

(b) a

"fixture filing" is the filing, in the office where a record of a

mortgage on the real estate would be filed or recorded, of a financing

statement covering goods that are or are to become fixtures and conforming to

the requirements of section 9-502(a) and (b) of this title;

(c) a lease is a

"purchase money lease" unless the lessee has possession or use of the

goods or the right to possession or use of the goods before the lease agreement

is enforceable;

(d) a mortgage

is a "construction mortgage" to the extent it secures an obligation

incurred for the construction of an improvement on land including the

acquisition cost of the land, if the recorded writing so indicates; and

(e)

"encumbrance" includes real estate mortgages and other liens on real

estate and all other rights in real estate that are not ownership interests.

(2) Under this

article a lease may be of goods that are fixtures or may continue in goods that

become fixtures, but no lease exists under this article of ordinary building

materials incorporated into an improvement on land.

(3) This article

does not prevent creation of a lease of fixtures pursuant to real estate law.

(4) The

perfected interest of a lessor of fixtures has priority over a conflicting

interest of an encumbrancer or owner of the real estate if:

(a) the lease is

a purchase money lease, the conflicting interest of the encumbrancer or owner

arises before the goods become fixtures, the interest of the lessor is

perfected by a fixture filing before the goods become fixtures or within ten

days thereafter, and the lessee has an interest of record in the real estate or

is in possession of the real estate; or

(b) the interest

of the lessor is perfected by a fixture filing before the interest of the

encumbrancer or owner is of record, the lessor's interest has priority over any

conflicting interest of a predecessor in title of the encumbrancer or owner,

and the lessee has an interest of record in the real estate or is in possession

of the real estate.

(5) The interest

of a lessor of fixtures, whether or not perfected, has priority over the

conflicting interest of an encumbrancer or owner of the real estate if:

(a) the fixtures

are readily removable factory or office machines, readily removable equipment

that is not primarily used or leased for use in the operation of the real

estate, or readily removable replacements of domestic appliances that are goods

subject to a consumer lease, and before the goods become fixtures the lease

contract is enforceable; or

(b) the

conflicting interest is a lien on the real estate obtained by legal or

equitable proceedings after the lease contract is enforceable; or

(c) the

encumbrancer or owner has consented in writing to the lease or has disclaimed

an interest in the goods as fixtures; or

(d) the lessee

has a right to remove the goods as against the encumbrancer or owner. If the

lessee's right to remove terminates, the priority of the interest of the lessor

continues for a reasonable time.

(6)

Notwithstanding paragraph (4)(a) of this section but otherwise subject to

subsections (4) and (5) of this section , the interest of a lessor of fixtures,

including the lessor's residual interest, is subordinate to the conflicting

interest of an encumbrancer of the real estate under a construction mortgage

recorded before the goods become fixtures if the goods become fixtures before

the completion of the construction. To the extent given to refinance a

construction mortgage, the conflicting interest of an encumbrancer of the real

estate under a mortgage has this priority to the same extent as the encumbrancer

of the real estate under the construction mortgage.

(7) In cases not

within the preceding subsections, priority between the interest of a lessor of

fixtures, including the lessor's residual interest, and the conflicting

interest of an encumbrancer or owner of the real estate who is not the lessee

is determined by the priority rules governing conflicting interests in real

estate.

(8) If the

interest of a lessor of fixtures, including the lessor's residual interest, has

priority over all conflicting interests of all owners and encumbrancers of the

real estate, the lessor or the lessee may (i) on default, expiration,

termination, or cancellation of the lease agreement but subject to agreement

and this article, or (ii) if necessary to enforce other rights and remedies of

the lessor or lessee under this article, remove the goods from the real estate,

free and clear of all conflicting interests of all owners and encumbrancers of

the real estate, but the lessor or lessee must reimburse any encumbrancer or owner

of the real estate who is not the lessee and who has not otherwise agreed for

the cost of repair of any physical injury, but not for any diminution in value

of the real estate caused by the absence of the goods removed or by any

necessity of replacing them. A person entitled to reimbursement may refuse

permission to remove until the party seeking removal gives adequate security

for the performance of this obligation.

(9) Even though

the lease agreement does not create a security interest, the interest of a

lessor of fixtures, including the lessor's residual interest, is perfected by

filing a financing statement as a fixture filing for leased goods that are or

are to become fixtures in accordance with the relevant provisions of the

article on Secured Transactions (Article 9). (Added 1993, No. 158 (Adj. Sess.),

§ 10, eff. Jan. 1, 1995; amended 1999, No. 106 (Adj. Sess.), § 13, eff. July 1,

2001.)