2023 New York Laws › UCC - Uniform Commercial Code › Article 2-A - Leases › Part 3 - Effect of Lease Contract › 2-A-309 - Lessor's and Lessee's Rights When Goods Become Fixtures.

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).