400.2A-309. Lessor's and lessee's rights when goods become fixtures.
Lessor's and lessee's rights when goods become fixtures.
400.2A-309. (1) In this section:
(a) goods are "fixtures" when they become so related to particularreal estate that an interest in them arises under real estate law;
(b) a "fixture filing" is the filing, in the office where a record ofa mortgage on the real estate would be filed or recorded, of a financingstatement covering goods that are or are to become fixtures and conformingto the requirements of Section 400.9-502(a) and (b);
(c) a lease is a "purchase money lease" unless the lessee haspossession or use of the goods or the right to possession or use of thegoods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it securesan obligation incurred for the construction of an improvement on landincluding the acquisition cost of the land, if the recorded writing soindicates; and
(e) "encumbrance" includes real estate mortgages and other liens onreal estate and all other rights in real estate that are not ownershipinterests.
(2) Under this Article a lease may be of goods that are fixtures ormay continue in goods that become fixtures, but no lease exists under thisArticle of ordinary building materials incorporated into an improvement onland.
(3) This Article does not prevent creation of a lease of fixturespursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority overa conflicting interest of an encumbrancer or owner of the real estate if:
(a) the lease is a purchase money lease, the conflicting interest ofthe encumbrancer or owner arises before the goods become fixtures, theinterest of the lessor is perfected by a fixture filing before the goodsbecome fixtures or within ten days thereafter, and the lessee has aninterest of record in the real estate or is in possession of the realestate; or
(b) the interest of the lessor is perfected by a fixture filingbefore the interest of the encumbrancer or owner is of record, the lessor'sinterest has priority over any conflicting interest of a predecessor intitle of the encumbrancer or owner, and the lessee has an interest ofrecord 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 ofthe 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 inthe operation of the real estate, or readily removable replacements ofdomestic appliances that are goods subject to a consumer lease, and beforethe goods become fixtures the lease contract is enforceable; or
(b) the conflicting interest is a lien on the real estate obtained bylegal or equitable proceedings after the lease contract is enforceable; or
(c) the encumbrancer or owner has consented in writing to the leaseor has disclaimed an interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against theencumbrancer or owner. If the lessee's right to remove terminates, thepriority of the interest of the lessor continues for a reasonable time.
(6) Notwithstanding subsection (4)(a) but otherwise subject tosubsections (4) and (5), the interest of a lessor of fixtures, includingthe lessor's residual interest, is subordinate to the conflicting interestof an encumbrancer of the real estate under a construction mortgagerecorded before the goods become fixtures if the goods become fixturesbefore the completion of the construction. To the extent given torefinance a construction mortgage, the conflicting interest of anencumbrancer of the real estate under a mortgage has this priority to thesame extent as the encumbrancer of the real estate under the constructionmortgage.
(7) In cases not within the preceding subsections, priority betweenthe interest of a lessor of fixtures, including the lessor's residualinterest, and the conflicting interest of an encumbrancer or owner of thereal estate who is not the lessee is determined by the priority rulesgoverning conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor'sresidual interest, has priority over all conflicting interests of allowners and encumbrancers of the real estate, the lessor or the lessee may(i) on default, expiration, termination, or cancellation of the leaseagreement but subject to the lease agreement and this article, or (ii) ifnecessary to enforce other rights and remedies of the lessor or lesseeunder this Article, remove the goods from the real estate, free and clearof all conflicting interests of all owners and encumbrancers of the realestate, but the lessor or lessee must reimburse any encumbrancer or ownerof the real estate who is not the lessee and who has not otherwise agreedfor the cost of repair of any physical injury, but not for any diminutionin value of the real estate caused by the absence of the goods removed orby any necessity of replacing them. A person entitled to reimbursement mayrefuse permission to remove until the party seeking removal gives adequatesecurity for the performance of this obligation.
(9) Even though the lease agreement does not create a securityinterest, the interest of a lessor of fixtures, including the lessor'sresidual interest, is perfected by filing a financing statement as afixture filing for leased goods that are or are to become fixtures inaccordance with the relevant provisions of the Article on SecuredTransactions (Article 9).
(L. 1992 S.B. 448, A.L. 2001 S.B. 288)Effective 7-01-01