Section 9-604 of the UCC, entitled Procedure if Security Agreement Covers Real Property, Fixtures, or Cooperative Interests, seems the logical starting point for the discussion. Does the landlord have a statutory, common law, or contractual right to rent payments from the secured creditor while the lender negotiates the sale of the equipment? Can the landlord attempt to collect back rent owed by the tenant from the secured creditor? How does the landlord protect itself from potential damage resulting in the removal of the equipment? Overriding questions remain, however, in instances where cooperation is impractical. Moreover, a landlord would rather have the secured creditor bear the cost of removing heavy equipment that is unnecessary for reletting the premises. A subsequent tenant may desire to operate a similar business with the secured creditor’s equipment in place. In many instances it is in the best interest of both parties to cooperate in this collective endeavor. In contrast, the secured creditor must dispose of the collateral in a commercially reasonable manner under UCC § 9-610, which when dealing with heavy equipment may require holding the collateral on the landlord’s premises for a period of time. The landlord obviously has a pressing interest to quickly empty and re-rent the commercial space. Little guidance, however, appears to be offered regarding the differing goals of a secured creditor and landlord when wed by a defaulting borrower/tenant. As to ordinary chattels left upon the premises on removal or after eviction, it is the duty of the landlord to notify the tenant to remove them, and in case he does not, to himself cause their removal”). 1906) (“the doctrine of abandonment applies only to fixtures. Kenmare Storage & Moving Co., 38 A.D.2d 944, (2nd Dep’t 1972) (“it is the duty of the landlord to notify the tenant to remove them, and in case he does not, to himself cause their removal”) Reich v. 1902) (“a dispossessed tenant is entitled to a reasonable time in which to remove his chattels”) Surks v. Similarly, a landlord’s right to remove a tenant’s personal property has been addressed at length in New York case law. See e.g., Bank of India, supra (holding “to establish a conversion claim it need only be shown that a plaintiff had…an immediate superior right of possession to the identifiable fund and the exercise by defendants of unauthorized dominion over the money in question to the exclusion of plaintiff’s rights”). The failure of either the debtor or the third-party landlord to release a secured creditor’s collateral can constitute a conversion of the property, allowing for an award of damages. “The secured party’s right to possession of the collateral upon default may be asserted against a third party in possession, which may not properly refuse upon the secured party’s request for delivery.” Bank of India v. Section 9-609 of the UCC allows a secured creditor to take possession and dispose of its collateral on the debtor’s premises after default. The rights of a secured creditor to secure and dispose of its collateral is fairly well established under New York’s Uniform Commercial Code (the “UCC”). By Devin Lawton Palmer, Esq., Partner, Boylan Code LLP
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |