TITLE 6A

Uniform Commercial Code

CHAPTER 6A-2.1

Leases

PART 6A-2.1-301

Effect of Lease Contract

SECTION 6A-2.1-309



   § 6A-2.1-309  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 § 6A-9-502(a) and (b);



   (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 chapter a lease may be of goods that are

fixtures or may continue in goods that become fixtures, but no lease exists

under this chapter of ordinary building materials incorporated into an

improvement on land.



   (3) This chapter 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 (10) 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 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 subsection (4)(a), but otherwise subject

to subsections (4) and (5), 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 the lease agreement and this chapter, or (ii) if necessary to

enforce other rights and remedies of the lessor or lessee under this chapter,

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 chapter on secured transactions (chapter 9 of

title 6).



History of Section.

(P.L. 1991, ch. 305, § 1; P.L. 2000, ch. 182, § 9; P.L. 2000, ch.

420, § 9.)