As a lender, it’s in your best interest to perfect your stake in the borrower’s assets. When their goods are personal property, you think UCC, when they’re real property, you think mortgage/deed of trust, but what if the goods skirt the line between personal and real property? For fixtures, or goods that are affixed to real property (but not permanent), you have to consider the goods’ circumstances and intent to pick the right way to secure your interest.
What are fixtures?
Fixtures are goods that are or will be “so related” to a real property that an interest in them “arises under real property law,” according to UCC Article 9 Section 102, defining secured transactions. This means that fixtures are attached to real property, but are not permanent, and with the right tools could be removed. Think goods that are bolted down, built in, built around, or planted to a property. Someone would have to use tools to reasonably remove these goods from a real property, but their removal would not compromise the integrity of the structure. When determining if an object is attached enough to a real property to be classified as a fixture, parties and courts evaluate numerous factors, including:
- The degree to which the object is attached to the property;
- The ease with which someone could remove the object from the property;
- The intention of the parties; and
- A third-party’s reasonable expectations of the property.
What is a fixture filing?
A fixture filing is a UCC financing statement with an addendum that is filed in the local jurisdiction where the real property is located and is then recorded in the real property records. This filing, like a normal UCC filing, must include the appropriate debtor name, secured party name, and collateral description, but additionally must include information on the real property, such as a description of the property and the real property owner’s name.
Examples of fixtures
What does fixture mean in layman’s terms? Think of it as something that someone physically attached to real estate. Taking it away could damage the property or lower the property's value.
Common fixtures include:
- Signs affixed to a building
- Solar panels attached to the roof
- Gas pumps
- Heavy-duty machines bolted to the floor
- Restaurant/kitchen equipment and appliances
When should you fill out a UCC fixture filing form?
A fixture addendum with the UCC form should be filed after a fixture is attached to a building or placed in its permanent spot. The record is effective from the date of recording if the record is sufficiently and duly recorded.
Where should you file a fixture filing?
The fixture filing, while still a UCC filing, differs in its recording location. This type of filing should be recorded in the real property records at “the office designated for the filing or recording of a record of a mortgage on the related real property,” as outlined in UCC Article 9, Section 501.
Why do you need perfection by filing?
Recording a fixture filing at the local real property office makes note of your lien on the debtor’s goods in the real property records. This recorded lien makes it clear to potential buyers that the property cannot be transferred until the existing debt is satisfied. Without a fixture filing, you risk losing the goods without recourse if the property is sold or goes into foreclosure.
Lien Solutions knows UCC fixture
Keeping track of UCC filing requirements for different assets is challenging. Lien Solutions helps navigate the complexities of fixture filings to secure your assets.