§ 4-2.5-309 — Lessor's and lessee's rights when goods become fixtures

Colorado § 4-2.5-309

• Jurisdiction: Colorado
• Title 04: Uniform
• Art.: Leases

Text

(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 or recorded, of a financing statement covering
goods that are or are to become fixtures and conforming to the requirements of
section 4-9-502 (a) and (b);

(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 article a lease may be of goods that are fixtures or may
continue in goods that become fixtures, but no lease exists under this article of
ordinary building materials incorporated into an improvement on land.

(3) This article 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, the interest of the
lessor is perfected by a fixture filing 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; or

(b) The conflicting interest is a lien on the real estate obtained by legal or
equitable proceedings after the lease contract is enforceable; or

(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) of this section but otherwise subject to
subsections (4) and (5) 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 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 encumbrancers
of the real estate, the lessor or the lessee may (i) on default, expiration, termination,
or cancellation of the lease agreement but subject to the lease agreement and this
article, or (ii) if necessary to enforce other rights and remedies of the lessor or
lessee under this article, remove the goods from the real estate, free and clear of
all conflicting interests of all owners and encumbrancers 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 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 the article on secured
transactions, article 9 of this title.

Legislative History

Source: L. 91: Entire article added, p. 293, � 1, effective July 1, 1992. L. 2001: (1)(b) amended, p. 1441, � 26, effective July 1.