§ 26-1-2.1-309 — Lessor's and lessee's rights when goods become fixtures

Indiana § 26-1-2.1-309

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 2.1: 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 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 IC 26-1-9.1-502(a) and IC 26-1-9.1-502(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 IC 26-1-2.1 a lease may be of goods that are fixtures or
may continue in goods that become fixtures, but no lease exists under
IC 26-1-2.1 of ordinary building materials incorporated into an
improvement on land.
(3) IC 26-1-2.1 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 (10) 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) but otherwise subject to
subsections (4) and (5), 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 IC 26-1-2.1, or (ii) if necessary
to enforce other rights and remedies of the lessor or lessee under IC 26-1-2.1, 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 IC 26-1-9.1.

Legislative History

As added by P.L.189-1991, SEC.3. Amended by P.L.34-1997, SEC.17; P.L.57-2000, SEC.26.