Okla. Stat. tit. 12A § 2A-309

Current through Laws 2024, c. 453.

Section 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 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 subsections (a) and (b) of Section 1-9-502 of this title, as applicable;

(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 (10) 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 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 paragraph (a) of subsection (4) of this section but otherwise subject to subsections (4) and (5) of this section, 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 other than those described in subsections (1) through (6) of this section, 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 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 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 Uniform Commercial Code - Secured Transactions.

Okla. Stat. tit. 12A, § 2A-309

Added by Laws 1988, HB 1683, c. 86, § 39, eff. 11/1/1988; Amended by Laws 1991, SB 25, c. 117, § 9, eff. 1/1/1992; Amended by Laws 2000 , SB 1519, c. 371, § 156, eff. 7/1/2001.

Oklahoma Code Comment

Article 2A imposes no filing requirement for leases with a substantial term or rental. The rejection of a filing requirement occurred for a variety of reasons. One basic reason is filing is not now required. See Yonkman Harvey, 271 P. 839 (Okla.1928) (mere possession and control of personal property by another does not estop real owner from asserting title against one who dealt with possessor on faith of apparent ownership) and Osborn v. Moasco, 73 P.2d 113 (Okla.l937) (no duty exists to record a bailment contract). The fact that a I lessor may file a financing statement under 12A Oklahoma Statutes § 9-408 as a precaution is not the same thing as imposing a requirement to do so for the failure of which an ownership interest in the property may be lost in the event of bankruptcy. For further discussion, see Mooney, The Mystery and Myth of "Ostensible Ownership" and Article 9 Filing: A Critique of Proposals to Extend Filing Requirements to Leases, 39 Ala.L.Rev. 683 (1988).

Article 2A, however, does impose a filing requirement in order for a lessor of fixtures to have priority under Article 2A over a conflicting interest of an encumbrancer (other than a construction mortgagee) or an owner of the real estate to which the fixture is attached in two cases. As in the case of UCC § 9-313(1)(a), § 2A-309(1)(a) leaves the definition of "fixture" to other law, except to deny that status under subsection (2) to building materials incorporated into an improvement. Thus it is necessary to turn to 60 Oklahoma Statutes § 7 and related provisions and the cases decided thereunder to determine if any real estate claim exists to the personal property. In particular, it might be noted that the result in Bancoklahoma Agri-Service Corporation v. C.I.T. Financial Services, 747 P.2d 934 (Okla.1987), which sustained a real estate claim to a mobile home placed on a foundation, has been overridden by legislation. See H.B.1641, amending 47 Oklahoma Statutes §1102(11) and adding § 1110E.

The first instance where a fixture filing is necessary under Article 2A and, if made, confers priority, is where the lease is one in which the lessee did not have possession or use of the goods or the right to possession or use of the goods before the lease agreement was enforceable, the conflicting interest of the encumbrancer or owner arose before the goods became fixtures, the lessor's interest is perfected by a fixture filing before the goods become fixtures or within 10 days thereafter, and the lessee has an interest of record in the real estate or is in possession of it. § 2A-309(4)(a) and (l)(c). A "fixture filing" for purposes of Article 2A is defined exactly as it is for purposes of UCC Article 9, and this includes Oklahoma's nonuniform amendment. See 12A Oklahoma Statutes §§ 2A -3 09(1)(b), 9-402(5) and 9-401A. Section 85 of H.B.1683 also amended 12A Oklahoma Statutes § 9-401A to make it clear that the terms "lessor" and "lessee" may be used in such a fling and that all related matters and filings are to be treated as they are in connection with an Article 9 filing even though, for example, 12A Oklahoma Statutes § 9-403 was not itself directly amended. See 12A Oklahoma Statutes § 9-401A(5).

The other instance were a fixture filing is necessary and, if made, confers priority is where the interest of the lessor is perfected by a fixture filing before the interest of the real estate 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 it. No fixture or other filing is required for priority in other cases, including where the encumbrancer or owner has consented in writing to the lease or has disclaimed an interest in the goods as fixtures. &e 12A Oklahoma Statutes § 2A-309(5). In the absence of compliance with a special rule under § 2A-309, the issue is not controlled by Article 2A and the real estate interest may well have priority as a residual matter. See 12A Oklahoma Statutes § 2A -309(7).

It is not clear to what extent § 2A-309 reflects prior Oklahoma law. Some authority exists in other states that, as the fixture lease will involve an interest in real estate, it is subject to the recording statute. See, ea., Western Machinery Co. v. Graetz, 108 P.2d 711 (Calif.App.1941). In Oklahoma, it could be argued the lease is an instrument relating to real estate and thus must be recorded to be valid as against third persons under 16 Oklahoma Statutes §15. No reported case addressing this issue was found. However, 60 Oklahoma Statutes § 319, which requires a written lease of equipment used in connection with an oil and gas well to be recorded to be valid against innocent purchasers or creditors of the lessee, involves a similar requirement in this limited circumstance. To that extent, § 2A-309(4), which itself requires a filing, should be considered to supersede § 319, particularly given the outdated filing rule expressed in § 320. Whether Article 2A otherwise repeals § 319 is discussed in the Oklahoma Comment to § 2A-307.

The 1991 amendments make no substantive changes here.