Sec. 42a-2A-409. Rights of lessor and lessee when goods become fixures.
Sec. 42a-2A-409. Rights of lessor and lessee when goods become fixures. (a)
In this section:
(1) "Construction mortgage" means a mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition
cost of the land, if a recorded record of the mortgage so indicates.
(2) "Encumbrance" includes a real property mortgage, other lien on real estate and
any other right in real property which is not an ownership interest.
(3) "Fixture filing" means a filing, in the office where a mortgage on the real property would be filed or recorded, of a financing statement covering goods that are or are
to become fixtures and conforming to the requirements of subsections (a) and (b) of
section 42a-9-502.
(4) "Fixtures" means goods that have become so related to particular real property
that an interest in them arises under real property law.
(5) "Purchase money lease" means a lease in which the lessee does not have possession or use of the goods or the right to possession or use of the goods before the lease
agreement is enforceable.
(b) A lease under this article may be of goods that are fixtures or may continue in
goods that become fixtures, but there may be no lease under this article of ordinary
building materials incorporated into an improvement on land.
(c) This article does not prevent creation of a lease of fixtures under real property
law.
(d) The perfected interest of a lessor of fixtures has priority over a conflicting interest
of an encumbrancer or owner of the real property if the lessee has an interest of record
in or is in possession of the real property and:
(1) Except as otherwise provided in subsection (f) of this section, the lease is a
purchase money lease, the interest of the encumbrancer or owner arises before the goods
become fixtures and the interest of the lessor is perfected by a fixture filing before the
goods become fixtures or within twenty days thereafter; or
(2) The interest of the lessor is perfected by a fixture filing before the interest of
the encumbrancer or owner is of record and the lessor's interest has priority over any
conflicting interest of a predecessor in title of the encumbrancer or owner.
(e) 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 property if:
(1) 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 property
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;
(2) The conflicting interest is a lien on the real property obtained by legal or equitable
proceedings after the lease contract is enforceable;
(3) The encumbrancer or owner has, in an authenticated record, consented to the
lease or has disclaimed an interest in the goods as fixtures; or
(4) The lessee has a right to remove the goods as against the encumbrancer or owner,
but if the lessee's right to remove terminates, the priority of the interest of the lessor
continues for a reasonable time.
(f) Except as otherwise provided in subsections (d) and (e) 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 property under a construction mortgage
recorded before the goods become fixtures if the goods become fixtures before the
completion of the construction. A mortgage has this priority to the same extent as a
construction mortgage to the extent that it is given to refinance a construction mortgage.
(g) In cases not covered by subsections (c) to (f), inclusive, of this section, 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 property which is not
the lessee is determined by the priority rules governing conflicting interests in real
property.
(h) If the interest of a lessor of fixtures, including the lessor's residual interest, has
priority over all owners and encumbrancers of the real property, the lessor or the lessee
may on default, expiration, termination or cancellation of the lease contract, but subject
to the lease agreement and this article, or if necessary to enforce other rights of the lessor
or lessee under this article, remove the goods from the real property, free and clear of
all conflicting interests of all owners and encumbrancers of the real property. However,
the lessor or lessee shall reimburse any encumbrancer or owner of the real property
which is not the lessee and which has not otherwise agreed for the cost of repair of any
physical injury, but not for any diminution in value of the real property, 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.
(i) Even if 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 pertinent provisions of article 9.
(P.A. 02-131, S. 36.)