Section 2-A-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--502

(a) and (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 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.

(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

(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 replacement 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
the lessee under this Article, 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 the 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 the article on secured
transactions (Article 9).