Tuesday, May 19, 2015

MBE Fast Fact: Fixture Filings

Article 9 of the UCC (Secured Transactions) can creep its way into Real Property questions on the MBE. Thankfully, if it does show up, it'll show up in a very limited context. The questions will play out with a seller of personal property lending money to a purchaser to purchase the personal property, and the seller taking out a Purchase Money Security Interest ("PMSI") as security for the loan. The item of personal property is then affixed by the purchaser to the purchaser's real property which is subject to a mortgage. The purchaser defaults on all loans, and then it must be determined whether the seller or the mortgagee has priority as to the sale of the fixture.

The important rule to keep in mind is the following: Even if the seller records his security interest after the mortgagee records his mortgage on the real property, the seller can still gain priority over the mortgagee as to the fixture, if the seller files what is called a fixture filing. The seller must record his security interest within 20 days after the item of personal property is affixed to the land.

If seller made that UCC filing in the required time period, seller may remove those fixtures that were the subject of the filing; if not, seller's security interest in the fixture is subordinate to the earlier mortgage on the property so that if the mortgagee forecloses, seller's interest in the item of personal property may be lost in the foreclosure sale.

No comments:

Post a Comment