Sec. 9-334. Priority of security interests in fixtures and crops.

848 words·~4 min read·/il/chapter-810/act-5/9-334

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(a)Security interest in fixtures under this Article. A security interest under this Article may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this Article in ordinary building materials incorporated into an improvement on land.

(b)Security interest in fixtures under real-property law. This Article does not prevent creation of an encumbrance upon fixtures under real property law.

(c)General rule: subordination of security interest in fixtures. In cases not governed by subsections

(d)through (h), a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.

(d)Fixtures purchase-money priority. Except as otherwise provided in subsection (h), a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and:

(1)the security interest is a purchase-money security interest;

(2)the interest of the encumbrancer or owner arises before the goods become fixtures;

and

(3)the security interest is perfected by a fixture filing before the goods become

fixtures or within 20 days thereafter.

(e)Priority of security interest in fixtures over interests in real property. A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:

(1)the debtor has an interest of record in the real property or is in possession of the

real property and the security interest:

(A)is perfected by a fixture filing before the interest of the encumbrancer or

owner is of record; and

(B)has priority over any conflicting interest of a predecessor in title of the

encumbrancer or owner;

(2)before the goods become fixtures, the security interest is perfected by any method

permitted by this Article and the fixtures are readily removable:

(A)factory or office machines;

(B)equipment that is not primarily used or leased for use in the operation of the

real property; or

(C)replacements of domestic appliances that are consumer goods;

(3)the conflicting interest is a lien on the real property obtained by legal or

equitable proceedings after the security interest was perfected by any method permitted by this Article; or

(4)the security interest is:

(A)created in a manufactured home in a manufactured-home transaction; and

(B)perfected pursuant to a statute described in Section 9-311(a)(2).

(f)Priority based on consent, disclaimer, or right to remove. A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if:

(1)the encumbrancer or owner has, in a signed record, consented to the security

interest or disclaimed an interest in the goods as fixtures; or

(2)the debtor has a right to remove the goods as against the encumbrancer or owner.

(g)Continuation of subsection (f)(2) priority. The priority of the security interest under subsection (f)(2) continues for a reasonable time if the debtor's right to remove the goods as against the encumbrancer or owner terminates.

(h)Priority of construction mortgage. A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates. Except as otherwise provided in subsections

(e)and (f), a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.

(i)Priority of security interest in crops.

(1)Subject to Section 9-322(g), a perfected security interest in crops growing on real

property has priority over:

(A)a conflicting interest of an encumbrancer or owner of the real property; and

(B)the rights of a holder of an obligation secured by a collateral assignment of

beneficial interest in a land trust, including rights by virtue of an equitable lien.

(2)For purposes of this subsection:

(A)"Collateral assignment of beneficial interest" means any pledge or assignment of

the beneficial interest in a land trust to a person to secure a debt to other obligation.

(B)"Land trust" means any trust arrangement under which the legal and equitable

title to real estate is held by a trustee, the interest of the beneficiary of the trust is personal property, and the beneficiary or any person designated in writing by the beneficiary has

(i)the exclusive power to direct or control the trustee in dealing with the title to the trust property,

(ii)the exclusive control of the management, operation, renting, and selling of the trust property, and

(iii)the exclusive right to the earnings, avails, and proceeds of trust property.