UCC fixture filings: Defining fixtures and how to file

Fixture vs. personal property (Applying the MARIA test)

A court of law may use the “MARIA” test to determine if something is personal property or a fixture. MARIA is the acronym for method, adaptability, relationship, intent, and agreement.

• Method of attachment: To determine if an item is a fixture, look at how it is attached to the property. Is it glued, nailed, or screwed? Are there pipes running through it? Would anyone be able to pick it up and walk out with it like a laptop computer or a lamp? If it is attached in a manner that would require tools to release it from the property, it will usually be deemed a fixture.
• Adaptability of item: If an item has become an integral part of a property, or an item was built specifically for the property, it is a fixture. An example would be floating hardwood flooring, a decorative designed window, or a built-in bookcase. You might be able to remove these items, but they were built and designed for a specific place on the property.
• Relationship of the parties: If a dispute occurs over what is and what isn’t a fixture, and a judgment has to be rendered, the role of the players in the complaint can make a difference. Courts will often favor specific parties when disputes arise regarding the selling of real property and the fixtures involved. It is common to see if the negotiation regarding fixtures is between buyer and seller, the buyer is likely to win. If it’s between tenant and landlord, the tenant is likely to win.
• Intent of the parties: While intent does not always play a role in a lien case, it does when it includes fixtures. The question becomes when the item was installed, did the owner intend for that item to be permanent? If it was the intention for the item to be permanent, it is a fixture. An example might be a garden, a built-in fountain, bushes, or a mailbox.
• Agreement: The final “A” in MARIA is for agreement. The written contract between the parties is very important and is certainly a way to make sure all those involved have an understanding of what is considered a part of the real property and therefore should remain, and what isn’t. If a dispute arises, the written signed contract will generally prevail.

Here are two case examples that allow you to review fixtures in action:

• Nokomis Quarry Company vs. Joseph Dietl (IL Appellate Ct. 5th Dist. August 27, 2002)
• In re Rolling Hills Camping Resort, Inc., 460 B.R. 145

How to perfect a security interest in a fixture

There are three principal ways for a creditor to perfect a security interest in a fixture.

• File a financing statement: The creditor can file a financing statement with the appropriate jurisdiction using the national form. This process would be followed for fixtures that are still considered personal property. (Example. A warehouse full of air conditioning units that are not affixed to any property.) A qualified financing statement should include the debtor name, secured party name, and an indication of the collateral.
• File a fixture filing statement: After a fixture is attached to a building or placed in its permanent spot, a creditor can file a fixture filing statement. This process utilizes the national UCC form along with an addendum page. In addition to the debtor name, secured party name, and indication of collateral, this filing must include a description of the property, the property owner's name, and must have the appropriate boxes checked. This type of filing would be filed where the real property is located/the local filing office.
• File a record of mortgage: A fixture can also be included in a mortgage/deed of trust. In this case, the fixture would be embedded in the mortgage document, which would be filed at the local filing office where the real property is located. A recorded mortgage that provides a security interest in fixtures will be effective in granting such an interest, as long as the mortgage includes all the standard requirements for a financing statement.

Conclusion

The more specialized the subject matter, the more you need expert due diligence to identify potential risks and ensure regulatory compliance. CT Corporation provides the specialized services that help ensure proper due diligence, including industry-specific searching for fixture filings.

To learn more about how CT Corporation’s services can help you better manage your compliance needs, contact a CT Corporation representative.