Drawing Property Lines: Personal Property vs. Real Property Under UCC Section 9

UCC §9-109 defines the scope of UCC Section 9. Under this section, “any transaction, regardless of form, which creates a security interest in personal property or collateral by contract” is governed by section 9, subject to certain exceptions. . Among these exceptions is any “creation or transfer of any interest or lien on real property, including a lease or rents thereunder”. UCC §9-109(d)(11). This exclusion is itself the subject of an exception in the event of enforcement, that of securities relating to both movable and immovable property. UCC §9-604. The back and forth is certainly confusing, but what is clear is that it can be difficult to know exactly where the line between real estate and personal property should be drawn.

This issue was recently brought before a judge in the nearly 200-year-old retailer Lord & Taylor (L&T) bankruptcy case. That case, In re Le Tote, 2020 WL 6875575 (Bankr. ED Va. 30 Oct. 2020), involved an attempt by a secured creditor to enforce L&T’s payment obligations under a master lease agreement for 24 retail stores. US Bankruptcy Judge Keith Phillips rejected the attempt, citing numerous reasons, but among which the plain language of §9-109 applied and the exception of §9-604 did not.


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