Lessor's and lessee's rights when goods become accessions

84-2a-310. Lessor's and lessee's rights when goods become accessions. (1) Goods are "accessions" when they are installed in or affixed to other goods. (2) The interest of a lessor or a lessee under a lease contract entered into before the goods became accessions is superior to all interests in the whole except as stated in subsection (4). (3) The interest of a lessor or a lessee under a lease contract entered into at the time or after the goods became accessions is superior to all subsequently acquired interests in the whole except as stated in subsection (4) but is subordinate to interests in the whole existing at the time the lease contract was made unless the holders of such interests in the whole have in writing consented to the lease or disclaimed an interest in the goods as part of the whole. (4) The interest of a lessor or a lessee under a lease contract described in subsection (2) or (3) is subordinate to the interest of: (a) A buyer in the ordinary course of business or a lessee in the ordinary course of business of any interest in the whole acquired after the goods became accessions; or (b) a creditor with a security interest in the whole perfected before the lease contract was made to the extent that the creditor makes subsequent advances without knowledge of the lease contract. (5) When under subsections (2) or (3) and (4) a lessor or a lessee of accessions holds an interest that is superior to all interests in the whole, the lessor or the lessee may (a) on default, expiration, termination or cancellation of the lease contract by the other party but subject to the provisions of the lease contract and this article, or (b) if necessary to enforce such lessor's or lessee's other rights and remedies under this article, remove the goods from the whole, free and clear of all interests in the whole, but such lessor or lessee must reimburse any holder of an interest in the whole who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury but not for any diminution in value of the whole caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation. History: L. 1991, ch. 295, § 40; February 1, 1992. KANSAS COMMENT, 1996 1. This section governs the lessor's and lessee's rights when goods become "accessions" — i.e., when the goods are affixed to or installed in other goods. An example of an accession is a replacement engine that is installed in a piece of equipment. The section is based on section 84-9-314, with changes that often parallel those in section 84-2a-309 dealing with fixtures. See also 1996 Kansas Comments to 84-9-314. 2. Under subsection (2), the interest of a lessor or lessee generally is superior to all interests in the whole if the lease contract was entered into before the goods became accessions. Under subsection (3), if the lease contract was entered into at the time or after the goods became accessions, the interest of a lessor or lessee is subject to then existing interests in the whole, unless the holders of those interests consent in writing to the lease or disclaim any interest in the goods. But the lessor's or lessee's interest generally is superior to all subsequently acquired interests in the whole. 3. Exceptions to these priority rules are stated in subsection (4). Paragraph (4)(a) subordinates the interest of a lessor or lessee to the interest of a buyer or lessor in the ordinary course of business that acquired its interest in the whole after the goods became accessions. Paragraph (4)(b) subordinates the interest of a lessor or lessee to the interest of a creditor with a security interest in the whole that was perfected before the lease contract was made, to the extent the creditor makes subsequent advances without knowing of the lease contract. 4. Subsection (5) states rules for removal from the whole of goods that are accessions. Those rules parallel section 84-2a-309(8) dealing with fixtures. See 1996 Kansas Comment 6 to 84-2a-309.