70A-2a-309. Lessor's and lessee's rights when goods become fixtures.
(1) In this section:
(a) goods are "fixtures" when they become so related to particular real estate that an
interest in them arises under real estate law;
(b) a "fixture filing" is the filing, in the office where a record of a mortgage on the real
estate would be filed, recorded, or registered, of a financing statement covering goods that are or
are to become fixtures and conforming to the requirements of Subsections 70A-9a-502(1) and (2);
(c) a lease is a "purchase money lease" unless the lessee has possession or use of the
goods or the right to possession or use of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it secures an obligation incurred
for the construction of an improvement on land including the acquisition cost of the land, if the
recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other liens on real estate and all
other rights in real estate that are not ownership interests.
(2) Under this chapter, a lease may be of goods that are fixtures or may continue in goods
that become fixtures, but no lease exists under this chapter of ordinary building materials
incorporated into an improvement on land.
(3) This chapter does not prevent creation of a lease of fixtures pursuant to real estate
law.
(4) The perfected interest of a lessor of fixtures has priority over a conflicting interest of
an encumbrancer or owner of the real estate if:
(a) the lease is a purchase money lease, the conflicting interest of the encumbrancer or
owner arises before the goods become fixtures, a fixture filing covering the fixtures is filed or
recorded before the goods become fixtures or within ten days thereafter, and the lessee has an
interest of record in the real estate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture filing before the interest of the
encumbrancer or owner is of record, the lessor's interest has priority over any conflicting interest
of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record 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 of the 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 in the operation of the real estate, 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;
(b) the conflicting interest is a lien on the real estate obtained by legal or equitable
proceedings after the lease contract is enforceable;
(c) the encumbrancer or owner has consented in writing to the lease or has disclaimed an
interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against the encumbrancer or owner. If
the lessee's right to remove terminates, the priority of the interest of the lessor continues for a
reasonable time.
(6) Notwithstanding Subsection (4)(a), but otherwise subject to Subsections (4) and (5),
the interest of a lessor of fixtures is subordinate to the conflicting interest of an encumbrancer of
the real estate under a construction mortgage recorded before the goods become fixtures if the
goods become fixtures before the completion of the construction. To the extent given to refinance
a construction mortgage, the conflicting interest of an encumbrancer of the real estate under a
mortgage has this priority to the same extent as the encumbrancer of the real estate under the
construction mortgage.
(7) In cases not within the preceding subsections, 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 estate who is not the lessee is determined by the priority rules governing
conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's residual interest, has priority
over all conflicting interests of all owners and encumbrances of the real estate, the lessor or the
lessee may:
(a) on default, expiration, termination, or cancellation of the lease agreement but subject
to the lease agreement and this chapter; or
(b) if necessary to enforce other rights and remedies of the lessor or lessee under this
chapter, remove the goods from the real estate, free and clear of all conflicting interests of all
owners and encumbrances of the real estate, but the lessor or lessee must reimburse any
encumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreed
for the cost of repair of any physical injury, but not for any diminution in value of the real estate
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 the goods until the party seeking
removal gives adequate security for the performance of this obligation.
(9) Even though 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 relevant provisions of Title 70A, Chapter 9a, Uniform Commercial Code -- Secured
Transactions.
Amended by Chapter 252, 2000 General Session
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Last revised: Thursday, May 28, 2009