Fixture filing: Overview, definition, and example
What is a fixture filing?
A fixture filing is a legal document filed with a public recording office to secure a lender's interest in fixtures—items that are attached to real property but retain their separate identity for financing purposes. This filing ensures that the lender has a secured interest in the fixtures, protecting their rights if the property is sold or foreclosed.
For example, a bank financing a restaurant may file a fixture filing to secure its interest in commercial kitchen equipment permanently installed in the building.
Why is a fixture filing important?
A fixture filing is important because it establishes a lender’s priority claim over specific fixtures, ensuring they can recover their investment if the borrower defaults. Without a fixture filing, a lender’s claim to financed fixtures could be challenged by property owners, landlords, or other creditors.
For businesses, fixture filings provide clarity in asset-based financing, allowing them to use fixtures as collateral for loans while ensuring the lender’s rights are legally protected.
Understanding fixture filing through an example
Imagine a retail store takes out a loan to install permanent shelving and display units in a leased commercial space. The lender files a fixture filing under the Uniform Commercial Code (UCC) to secure its interest in the shelving. If the store defaults on the loan, the lender has the right to claim the shelving, even though it is attached to the property.
In another case, a manufacturer purchases heavy machinery and secures financing through a bank. The bank files a fixture filing to ensure that if the company faces financial trouble, it can recover the machinery, even though it is permanently installed at the facility.
An example of a fixture filing clause
Here’s how a clause like this might appear in a financing agreement:
“The Borrower grants the Lender a security interest in all fixtures located at [Property Address]. The Lender shall file a Fixture Filing under the Uniform Commercial Code to perfect its interest in such fixtures. In the event of default, the Lender shall have the right to recover or repossess the secured fixtures in accordance with applicable law.”
Conclusion
A fixture filing protects a lender’s interest in permanently attached equipment or assets by ensuring a legal claim over those fixtures. It is commonly used in secured lending agreements where financed assets become part of real property. Properly filing and documenting fixture filings help businesses and lenders clarify ownership rights and avoid disputes over secured assets.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.