2007 Minnesota Statutes

336.2A-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 record of 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 336.9-502(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 after that, 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 replacements 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 the lessor's or lessee's
other rights and remedies 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
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).
History: 1989 c 232 art 1 s 2A-309; 1991 c 171 art 1 s 6; 2000 c 399 art 2 s 11