UCC Filings: Fixture Filings 101
Today’s post is a 101 on fixtures and fixture filings as they pertain to Article 9 of the Uniform Commercial Code. Most variations of UCC filings are fairly easy to explain. A Blanket filing is a security interest in all assets of your customer. A Purchase Money Security Interest filing grants a security interest like a blanket filing, but with the added ability to repossess inventory or equipment. But fixture filings… fixture filings, seem to be a bit more difficult to understand.
First, Define Fixture
The general idea of a fixture filing isn’t necessarily the complicated part; it’s actually determining what constitutes as a “fixture” that can be tricky. Here are the definitions of fixtures and fixture filing under Article 9:
- What are fixtures? Fixtures are “goods that have become so related to particular real property that an interest in them arises under real property law”. – Article 9-102(41)
- What is a fixture filing? A fixture filing is “the filing of a financing statement covering goods that are or are to become fixtures and satisfying Section 9-502(a) and (b). The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.” – Article 9-102(40)
What Can Be Considered a Fixture?
Based on the definition under Article 9, it would be anything that is “so related to a particular real property.”
The key is “so related,” which indicates the item isn’t permanent, but is still physically attached to the real property. You will likely notice a theme here: the items are secured to the building or premises, but can be removed if necessary and their removal won’t impact the structural soundness of the building or property. Here are just a few examples of items that could be covered by Article 9:
- Hotel headboards and external signs
- Headboards are often affixed to the wall, but could be removed without compromising the physical integrity of the hotel (i.e. a support beam would compromise the hotel, but simply changing out a headboard that is secured to the wall won’t make the building tumble to the ground). Similarly, the signs you see outside the hotel identifying it’s a Holiday Inn or Marriott are attached to the building, but not permanent.
- Gas/Fuel pumps
- The pumps you pull up to when it’s time to fill your tank are secured to the ground with bolts (or something similar). If the pump is removed, it doesn’t impact the actual property, as a new pump could be put right back in its place. Another common fixture similar to gas/fuel pumps, would be air tanks that are secured outside places like hospitals. Here in Cleveland, OH, there are Airgas tanks, which can be seen from the highway, that are secured on the backside of the MetroHealth campus. These tanks are affixed to the ground, but they can be removed if necessary.
- Walk-In Coolers, Ovens, Dishwashers, Air-vent/Oven hoods etc.
- Equipment often seen in restaurants would likely be considered fixtures. These pieces of equipment are typically secured to the building, whether it’s the floor or the walls, but again, can be removed if necessary.
Filing on a Fixture & Fixture Filing
Fixture filings and filing on a fixture are actually two different filings.
A filing on a fixture is simply a UCC Financing Statement, recorded with the Secretary of State, which includes “fixtures” in the collateral description. This filing does not attach to real property and would not appear in real property records (i.e. the county Assessor’s or Recorder’s Offices).
I tend to think of a filing on a fixture as a typical UCC filing, as it must comply with Article 9 just as blanket filings & PMSI filings do, but the collateral description would include “fixtures.”
Although a fixture filing is still a UCC filing, it is recorded in the real property records, which then turns the security interest into a mortgage or lien against the actual property where the fixture is or will be located. A fixture filing should satisfy Sections 9-502(a) & (b). Section 9-502(b) is key, as it is specific to real property:
(b) [Real-property-related financing statements.]
Except as otherwise provided in Section 9-501(b), to be sufficient, a financing statement that covers as-extracted collateral or timber to be cut, or which is filed as a fixture filing and covers goods that are or are to become fixtures, must satisfy subsection (a) and also:
(1) indicate that it covers this type of collateral;
(2) indicate that it is to be filed [for record] in the real property records;
(3) provide a description of the real property to which the collateral is related [sufficient to give constructive notice of a mortgage under the law of this State if the description were contained in a record of the mortgage of the real property]; and
(4) if the debtor does not have an interest of record in the real property, provide the name of a record owner.
Why record a fixture filing? One excellent reason is because the filing clouds the title of the property. This encumbrance alerts potential buyers/sellers that you need to be paid before the filing will be removed from the property – essentially the filing keeps the property from transferring from one party to another, until the debt is satisfied.
If you are providing items that are affixed to real property, do both a filing on a fixture with the Secretary of State and a fixture filing with the real property records.