MBE Fast Fact: Real Property (Fixtures)

Article 9 of the UCC (Secured Transactions) shows up in a specific context on the MBE; namely, when fixtures are implicated. The situation will be as follows: A seller will sell an item of personal property to a buyer, and retain a security interest in that item of personal property. The buyer takes the item of personal property and affixes it to the land, so that it obtains the status of a fixture. The landowner then takes out a loan, and mortgages the land as security for the loan. The landowner then defaults on both loans.

The general rule is that the first to record his interest (between the seller of the personal property and the mortgagee) takes priority over the other. But Article 9 changes the results, slightly. The seller can take priority over the mortgagee regardless as to whether he recorded prior to the mortgagee provided that the seller records within 20 days after the item of personal property is affixed to the land. This, under article 9, is known as a "Fixture Filing." This is meant to protect the seller, so that if the mortgagee forecloses on the land (which would generally include all fixtures therein,) the seller will not lose his security interest in the item of personal property affixed.