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Complete Home & Office Legal Guide
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Complete Home and Office Legal Guide (Chestnut) (1993).ISO
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2A-307. Priority of Liens Arising by Attachment or Levy on,
Security Interests in, and Other Claims to Goods.
(1) Except as otherwise provided in Section 2A-306, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsections (3) and (4)
and in Sections 2A-306 and 2A-308, a creditor of a lessor takes
subject to the lease contract unless:
(a) the creditor holds a lien that attached to the goods
before the lease contract became enforceable,
(b) the creditor holds a security interest in the goods and
the lessee did not give value and receive delivery of the goods
without knowledge of the security interest; or
(c) the creditor holds a security interest in the goods
which was perfected (Section 9-303) before the lease contract
became enforceable.
(3) A lessee in the ordinary course of business takes the
leasehold interest free of a security interest in the goods
created by the lessor even though the security interest is
perfected (Section 9-303) and the lessee knows of its existence.
(4) A lessee other than a lessee in the ordinary course of
business takes the leasehold interest free of a security
interest to the extent that it secures future advances made after
the secured party acquires knowledge of the lease or more than 45
days after the lease contract becomes enforceable, whichever
first occurs, unless the future advances are made pursuant to a
commitment entered into without knowledge of the lease and before
the expiration of the 45-day period.
2A-308. Special Rights of Creditors.
(1) A creditor of a lessor in possession of goods subject
to a lease contract may treat the lease contract as void if as
against the creditor retention of possession by the lessor is
fraudulent under any statute or rule of law, but retention of
possession in good faith and current course of trade by the
lessor for a commercially reasonable time after the lease
contract becomes enforceable is not fraudulent.
(2) Nothing in this Article impairs the rights of creditors
of a lessor if the lease contract (a) becomes enforceable, not in
current course of trade but in satisfaction of or as security for
a pre-existing claim for money, security, or the like, and (b) is
made under circumstances which under any statute or rule of law
apart from this Article would constitute the transaction a
fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an
identification of goods to a contract for sale as void if as
against the creditor retention of possession by the seller is
fraudulent under any statute or rule of law, but retention of
possession of the goods pursuant to a lease contract entered into
by the seller as lessee and the buyer as lessor in connection
with the sale or identification of the goods is not fraudulent if
the buyer bought for value and in good faith.
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
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 9- 402(5);
(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.
/* Ordinary materialmen's liens apply to the construction
materials. */
(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
/* Purchase money liens so far as it is properly perfected would
be a windfall to prior lienors. Accordingly, as in other
chapters, these liens take priority. */
(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 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 a