Priority of Multiple Purchase Money Security Interest - Explained
When Multiple Lenders Facilate the Purchase of Collateral
Written by Jason Gordon
Updated at September 26th, 2021
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Table of Contents
What is the priority of conflicting purchase-money security interests?Discussion QuestionPractice QuestionAcademic ResearchWhat is the priority of conflicting purchase-money security interests?
Often a debtor will acquire property subject to multiple purchase-money security interests. This happens when multiple parties lend money for the purchase (enabling loans) and the seller of the good finances part of the purchase. In such a situation, the UCC 9-324(g)(1) provides priority for the individual financing the purchase over individuals providing a financing loan. If all of the financiers or enabling lenders are the same, the UCC 9-324(g)(2) provides that the first to file or perfect the security interest determines priority.
Next Article: Priority of Security Interest in Fixtures Back to: SECURED TRANSACTIONS
Related Topics
- What are the general Priority Rules for Conflicting security interests?
- Subordination Agreement
- Who has Priority in Proceeds from the sale of collateral?
- What is a secured party's priority in future advances to a debtor?
- What is the priority of a PMSI in goods (other than inventory and livestock)?
- What is the priority of a PMSI in inventory?
- What is the priority of conflicting PMSIs?
- What is the priority of security interests in fixtures?
- What is the scope of fixture priority rules?
Discussion Question
Why do you think the law prefers financing sellers over enabling lenders? If all lenders have similar PMSIs, how do you feel about the first to file system?
Practice Question
ABC Corp purchase equipment from 123, LLC. ABC places a down payment of 50% of the value and finances the remaining 50% through 123. 333, Inc., and 444, Inc., make separate loans in equal amounts to ABC to provide the money to place the 50% down payment. In this situation, what is the priority of security interests?