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It depends on your jurisdiction.

Perfection as to fixtures

Fixtures are goods that become so related to particular real property that an interest in them arises under real property law. U.C.C. 9-102(a)(41). State law other than the commercial code, either common law or statute, tells us when goods become so related to real property as to generate an interest under real property law. Consider the following example. A lender finances a debtor's purchase of an expensive piece of equipment and takes a security interest in the equipment to secure the purchase money loan. The equipment is to be bolted to the floor of a plant and connected by conveyor belts to other equipment of the debtor, a manufacturer. The debtor may own the real property on which the equipment is being installed, perhaps subject to a mortgage in favor of another lender, or the debtor may lease the real property from its owner. If the debtor defaults in payments to the financier of the equipment, or defaults in mortgage or lease payments, we may need to know who has the superior interest in the piece of equipment. In order to answer this question, we first need to know whether or not the piece of equipment is a fixture.

Under the common law of some jurisdictions the equipment will remain personal property even after installation and connection. In such as case, by definition, the real property secured lender or the lessor of the property has no property interest in the equipment; hence, no priority dispute will be presented. The personal property secured lender may safely disregard the potential claims of a mortgagee or lessor and need only concern itself with perfecting its security interest, by the filing of a financing statement, to protect itself against other potential personal property claimants. It will do so by filing. Possession, although a permissible method of perfection, would not be feasible because the debtor needs to use the property. U.C.C. 9-301(1) prescribes the applicable choice of law rule (the law of the jurisdiction in which the debtor is located) and the applicable state's version of U.C.C. 9-501(a) will prescribe the location of filing. See Commentary.Location of filing

Under the common law of other jurisdictions, the equipment, personal property when first acquired, will be considered a fixture upon installation. In such a case, the personal property lender will retain a security interest in the fixture, the mortgagee or lessor of the real property, by definition of the word fixture, will have an interest in the equipment, and, absent sufficient value to cover both debts, a priority dispute between the two claimants will be presented. Here the personal property secured lender will need to concern itself with the potential claims of both the mortgagee or lessor as well as potential personal property claimants. Once again it must perfect by filing. To do so, it may file a financing statement, or it may make a fixture filing, or it may do both. For the difference between a financing statement and a fixture filing, compare U.C.C. 9-102(a)(39) with U.C.C. U.C.C. 9-102(a)(40) and compare U.C.C. 9-502(a) with U.C.C. 9-502(b). In Problem.Perfection as to fixtures we explore what choice the personal property lender should make.

U.C.C. 9-301(1) prescribes the applicable choice of law rule for the filing of a financing statement that is not filed as a fixture filing. U.C.C. 9-301(3) prescribes the applicable choice of law rule for a fixture filing. Having selected the appropriate state, that state's version of U.C.C. 9-501(a) instructs where within the state the lender should file.

One important caveat. Here we have considered only how a security interest in a fixture can be perfected. We have not discussed how one's status as perfected or unperfected will affect a particular priority dispute. Perfection is not perfect; it gives the secured party the most that it can gain in a priority dispute but does not assure victory. By the same token, a secured party with an unperfected security interest in a fixture can still prevail in some priority disputes. We tackle these priority disputes in Problem.Fixtures.

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Q: What is the difference between fixtures and fittings and plant and equipment?
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