Improvements and Fixtures

A fixture is a former chattel, or personal property , which retains its separate identity and is connected to real property in such a way that it becomes part of the real property. One may think of a furnace or boiler and the related pipes and duct work in a house as an example of a fixture. When purchasing a home, the heating system would be included as part of the home, i.e., as part of the improvements to the real property. Fixtures do not qualify for separate insurance coverage under a title policy. 


Fixtures may be the subject of separate liens, in the form of financing statements filed in conformity with the Uniform Commercial Code (UCC). One will see these quite often in a commercial transaction where the fixtures may have been financed separately from the balance of the improvements. If a lender asks for affirmative coverage over the affects of any filed financing statements, a search of the appropriate records must be performed at the state as well as local county level to discover any financing statements. These statements should be indexed against the name of the debtor named in the financing statement, and the UCC requires that the statement also describe the property where the goods are held. This may not be a legal description and may be an address. 


Although a financing statement secured against a fixture would not attach to the real property, it will still be a lien on the collateral listed since this collateral (as a fixture) becomes part of the real property, the financing statement must be terminated before a new lender or new owner is insured. Under the UCC in most states, security interests in goods which become fixtures have priority over subsequently recorded real estate interests. 


In no event should there ever be any affirmative statement in a policy or commitment that a chattel has or has not become affixed to the insured property or they have or have not become fixtures.


Insuring Improvements Only