Revised Article 9 of the Uniform Commercial Code and Selected Real Property Finance Issues

1. What's a Fixture? State Law continues to determine what is a "fixture." The only help the UCC offers is in Section 344(a), which says, in effect, that the term does not include "ordinary building materials incorporated into an improvement on land."

2. Priority between mortgagee and fixture lender secured party. In a conflict between the mortgagee and a secured party with a perfected security interest in goods before they became fixtures, the mortgagee usually has priority when the goods become fixtures. 9-334(c). [All references are to sections of revised Article 9 as promulgated, not as enacted by a particular state.] However, the secured party has priority (even if it has only filed in the UCC records, and not in the land records) if the goods are "factory or office machines" [or] equipment . . . not primarily used . . . in the operation of the real property." The emphasized language is new. Also, a secured party with a purchase money security interest ("PMSI") in fixtures will prevail over a pre-existing mortgage (other than a construction mortgage) if the PMSI is perfected by a fixture filing within 20 days after the goods become fixtures. 9-334(d). However, a construction mortgage primes even a PMSI if the goods become fixtures before completion of the construction. 9-334(h).