Real Estate Law | Course Paper

Real Estate Law and Land

Use Policy

MSRE 6120-U90 (22140)

Professor: Renee Franklin Hill

Housekeeping

Creation of Article 9 Security

Interest In Fixtures

1. The security agreement

2. Debtor’s rights in the collateral

3. Value given by Creditor

The security interest is perfected when a

financing statement is filed in the

appropriate state or local office.

Priorities Under Article 9

1. A secured creditor has priority over an unsecured creditor

2. A perfected secured creditor has priority over an unperfected

secured creditor.

3. A perfected secured creditor has priority over subsequent

real estate interests (for example, a filing on January 3rd

gives the secured party priority over filings occurring later in

that month or simply later in time)

4. A prior real estate interest (mortgage, deed of trust, lien, or

judgment) has priority over a subsequently filed security

interest

5. Between perfected secured creditors the date of filing is

controlling, with the first creditor to file having priority

Exceptions to General

Priority Rules

PMSI has priority over prior recorded land interest if financing

statement filed within 20 days from when fixture becomes

affixed.

Example: D purchases a home with funds lent by Y. Y has

recorded a mortgage (Jan 2006). D purchases an air

conditioner from X on credit and X files a financing

statement before putting the air conditioner in on May 31,

2009. X has a PMSI, filed before the air conditioner became

a fixture and thus has priority over Y.

Default by Debtor

Rights of Secured Party

Creditor has right to remove collateral from

real estate

Must reimburse owner for cost of removal or

repair any injury to the property

Need not compensate for decrease in value

Creditor can foreclose on property and take

priority

It is a creditor’s choice

NC Standard Residential

Offer to Purchase

8 (g) Good Title, Legal Access: Seller shall execute and deliver a

GENERAL WARRANTY DEED for the Property in recordable form

no later than Settlement, which shall convey fee simple

marketable and insurable title, without exception for mechanics’

liens, and free of any other liens, encumbrances or defects,

including those which would be revealed by a current and

accurate survey of the Property, except: ad valorem taxes for the

current year (prorated through the date of Settlement); utility

easements and unviolated covenants, conditions or restrictions

that do not materially affect the value of the Property; and such

other liens, encumbrances or defects as may be assumed or

specifically approved by Buyer in writing. The Property must have

legal access to a public right of way.

In re Williams

Facts: Williams paid for guttering system by Wells Fargo card.

Under terms of card William agreed that the gutters would

remain personal property and will not become a fixture and that

Wells Fargo would have a Purchase Money Security Interest

(PMSI) in gutters. After default Mortgage Company argued that

the gutters were a fixture and Wells no longer had a security

interest because it failed to record the claim. Wells said no

need to file because gutters were personal property not a

fixture.

Issue: Was the guttering real or personal property? Was Wells

a secured or unsecured creditor?

Held: Parties agreement provided the guttering continued as a

personal property. Wells had a PMSI that automatically

perfected and has priority over real estate mortgage and is

entitled to payment for the guttering

Consider 5.5

Page 109

Court held that Sears’ purchase money

security interest attached prior to the goods

becoming affixed to the realty as fixtures.

Therefore, the PMSI has priority over the

conflicting mortgage interest. Sears had a

“super priority.” Sears could remove the

fixtures and pay the cost of repairs or Sears

could foreclose and enjoy first priority.

Cautions and Conclusions

Page 110

Creditors need to determine their position under Article 9.

1. Is there a written security agreement with all of the necessary

information?

2. Has value been given?

3. Has the security interest attached?

4. To whose property is the item being attached?

5. What other creditors have interest in that property? Is there a

construction mortgage? Have the land records been checked?

6. Is the financing statement complete? Is the legal description

included and accurate? Is the collateral sufficiently identified?

7. Has the financing statement been filed and in the correct place?

8. Has the financing statement been filed within the appropriate time

limits (20 days on a PMSI)?

9. Is renewal necessary? When?

10. Can removal damage be minimized?

Chapter Problem 1

Page 110

1. A marble monument with a cement

foundation in a cemetery?

2. Bookshelves in a library

3. Wall mirrors installed by a tenant.

4. A furnace that is bolted to the floor in a

factory

5. A hog house (with a cement foundation) on

a farm

6. Ceiling fans in a home

7. A printing machine in a college copy center

Chapter Problem 2

Page 111

If Bill defaults, may Carl’s remove the

shelves?

If Carl removes, what obligations does