Daily Development for
Friday, October 18, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

LANDLORD/TENANT; LANDLORD'S REMEDIES; LANDLORD'S LIEN: Landlord's right to a contractual lien under its lease with tenant granted landlord an enforceable security interest in all of tenant's personal property, and therefore landlord was entitled to retain tenant's personal property that would otherwise be exempt from execution under landlord's statutory lien.

Butters v. Jackson 917 P.2d 87 (Utah App. 1996).

In this case, landlord's lease provided that "furniture, fixtures and personal property of tenant may not be removed from premises until rent or other charges are fully paid" and provided for landlord to have a lien on such property. The Supreme Court of Utah held that because the parties had created a contractual lien sthat was a security interest under Article 9 of the Uniform Commercial Code, the landlord did not need to satisfy the requirements for enforcing a statutory lien under the Utah code. Further, the court held that, because this lien was a contractual lien, it applied to all of tenant's property, even though some of tenant's property would otherwise be exempt from execution under the statutory lien provisions of the Utah Code.

Comment 1: Note that it is quite common for a tenant to give a security interest in its personal property and inventory to a commercial lender. Such liens frequently have priority over the landlord's lien, most often simply because landlord had failed to perfect its contractual security interest through a UCC filing. (Sometimes the bank lien predates the lease.) Lenders frequently have potential conversion claims against landlords who, without properly establishing their priority, "move in" on a defaulting tenant's goods. Lawyers seeking to enforce landlord's liens should tread lightly, as competing UCC filings are not nearly as easy to identify as prior claims in land records.

Comment 2: Landlords will be happy to note a holding that the contractual lien is entirely separate from the statory lien, as in many states a landlord can obtain a statutory landlord's lien only if the landlord posts a bond.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Laprica Mims at the ABA. (312) 988 6233 or LaPricaMims@staff.abanet.org

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