§ 25-9-334. Priority of security interests in fixtures and crops. - North Carolina Statutes

§25‑9‑334.  Priority of security interests in fixtures and crops.

(a)        Security interestin fixtures under this Article. – A security interest under this Article may becreated in goods that are fixtures or may continue in goods that becomefixtures. A security interest does not exist under this Article in ordinarybuilding materials incorporated into an improvement on land.

(b)        Security interestin fixtures under real‑property law. – This Article does not preventcreation of an encumbrance upon fixtures under real property law.

(c)        General rule:subordination of security interest in fixtures. – In cases not governed bysubsections (d) through (h) of this section, a security interest in fixtures issubordinate to a conflicting interest of an encumbrancer or owner of therelated real property other than the debtor.

(d)        Fixtures purchase‑moneypriority. – Except as otherwise provided in subsection (h) of this section, aperfected security interest in fixtures has priority over a conflictinginterest of an encumbrancer or owner of the real property if the debtor has aninterest of record in or is in possession of the real property and:

(1)        The securityinterest is a purchase‑money security interest;

(2)        The interest of theencumbrancer or owner arises before the goods become fixtures; and

(3)        The securityinterest is perfected by a fixture filing before the goods become fixtures orwithin 20 days thereafter.

(e)        Priority ofsecurity interest in fixtures over interests in real property. – A perfectedsecurity interest in fixtures has priority over a conflicting interest of anencumbrancer or owner of the real property if:

(1)        The debtor has aninterest of record in the real property or is in possession of the realproperty and the security interest:

a.         Is perfected by afixture filing before the interest of the encumbrancer or owner is of record;and

b.         Has priority overany conflicting interest of a predecessor in title of the encumbrancer orowner;

(2)        Before the goodsbecome fixtures, the security interest is perfected by any method permitted bythis Article and the fixtures are readily removable:

a.         Factory or officemachines;

b.         Equipment that isnot primarily used or leased for use in the operation of the real property; or

c.         Replacements ofdomestic appliances that are consumer goods;

(3)        The conflictinginterest is a lien on the real property obtained by legal or equitableproceedings after the security interest was perfected by any method permittedby this Article; or

(4)        The securityinterest is:

a.         Created in amanufactured home in a manufactured‑home transaction; and

b.         Perfected pursuantto a statute described in G.S. 25‑9‑311(a)(2).

(f)         Priority based onconsent, disclaimer, or right to remove. – A security interest in fixtures,whether or not perfected, has priority over a conflicting interest of anencumbrancer or owner of the real property if:

(1)        The encumbrancer orowner has, in an authenticated record, consented to the security interest ordisclaimed an interest in the goods as fixtures; or

(2)        The debtor has aright to remove the goods as against the encumbrancer or owner.

(g)        Continuation ofsubdivision (f)(2) priority. – The priority of the security interest undersubdivision (f)(2) of this section continues for a reasonable time if thedebtor's right to remove the goods as against the encumbrancer or ownerterminates.

(h)        Priority ofconstruction mortgage. – A mortgage is a construction mortgage to the extentthat it secures an obligation incurred for the construction of an improvementon land, including the acquisition cost of the land, if a recorded record ofthe mortgage so indicates. Except as otherwise provided in subsections (e) and(f) of this section, a security interest in fixtures is subordinate to aconstruction mortgage if a record of the mortgage is recorded before the goodsbecome fixtures and the goods become fixtures before the completion of theconstruction. A mortgage has this priority to the same extent as a constructionmortgage to the extent that it is given to refinance a construction mortgage.

(i)         Priority ofsecurity interest in crops. – Except as provided in G.S. 42‑15, aperfected security interest in crops growing on real property has priority overa conflicting interest of an encumbrancer or owner of the real property if thedebtor has an interest of record in or is in possession of the real property. (1965,c. 700, s. 1; 1967, c. 562, s. 1; 1975, c. 862, s. 7; 2000‑169, s. 1.)