How can we perfect a lien on an airplane hangar? Our borrower owns the hangar and has taken out a sublease of the underlying land. We are taking an assignment of the sublease and wanted to perfect our security interest in the hangar.

We recommend perfecting your bank’s lien on the hangar by filing a financing statement with the Secretary of State, as well as recording a fixture filing with the county in which the hangar is located.

The Uniform Commercial Code (UCC) requires perfection by filing a financing statement for most collateral types, unless an exception applies. We have reviewed the exceptions provided and do not believe that any of them would apply to an airplane hangar. For example, automobiles are excepted because vehicle liens must be noted on a certificate of title (rather than by being perfected with a financing statement). However, we are not aware of any Illinois law that would require liens on an airplane hangar to be noted on a certificate of title. We confirmed with the Illinois Secretary of State Department of Business Services that they would accept a financing statement for an airplane hangar, as they would for other types of portable buildings.

While a financing statement may be sufficient to perfect your security interest in the hangar, we also think that a second filing with the county would provide additional protection. It is possible that an airplane hangar could be considered a “fixture,” which would require an additional fixture filing to perfect your bank’s lien. “Fixtures” are “goods that have become so related to particular real property that an interest in them arises under real property law,” a definition that arguably could apply to an airplane hangar. We are unaware of any cases, either in Illinois or in another state, establishing whether an airplane hangar should be treated as a fixture. But also filing a fixture filing with the recorder in the county where the hangar is located would minimize the risk that a court might find the financing statement filed with the Secretary of State to be insufficient because the hangar is a fixture. This “belt and suspenders” approach to fixture filings was recommended in a white paper made available by the American Bar Association, which we link to in our resources below.

For resources related to our guidance, please see:

810 ILCS 5/9-310 (“Except as otherwise provided in subsection (b) and Section 9-312(b), a financing statement must be filed to perfect all security interests and agricultural liens. . . .”)

810 ILCS 5/9-311(a)(3) (“ . . . the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to: (1) a statute, regulation, or treaty of the United States.”)

810 ILCS 5/9-102(a)(40) (“‘Fixture filing’ means the filing of a financing statement covering goods that are or are to become fixtures and satisfying Section 9-502(a) and (b). . . .”)

810 ILCS 5/9-102(a)(41) (“‘Fixtures’ means goods that have become so related to particular real property that an interest in them arises under real property law.”)

810 ILCS 5/9-502 (Required contents for financing statements and fixture filings.)

810 ILCS 5/9-501(a)(1)(B) (If a “financing statement is filed as a fixture filing and the collateral is goods that are or are to become fixtures,” it must be filed in “the office designated for the filing or recording of a record of mortgage on the related real property.”)

810 ILCS 5/9-501(a)(2) (“[T]he office in which to file a financing statement to perfect the security interest or agricultural lien is: . . . (2) the office of the Secretary of State in all other cases, including a case in which the collateral is goods that are or are to become fixtures and the financing statement is not filed as a fixture filing.)

Brennan Posner, Sutherland Asbill & Brennan LLP, Fixated on Fixtures: An Overview of Perfecting and Ensuring Priority of Security Interests in Fixtures (“When collateral consists of goods that might be or become fixtures, ‘belt-and-suspenders’ protections should be the creditor’s guiding principle. A creditor cannot conclusively determine in many instances whether a good is or is not a fixture, and it cannot predict or prevent all circumstances under which that good might become a fixture. As a result, the creditor must analyze the competing claimants that exist in the case of non-fixture goods and in the case of fixtures, and take steps to protect itself in either result. Where collateral might be or becomes fixtures, it is generally advisable to file both a fixture filing and a personal property filing. Both filings will result in perfection in the fixtures, but without the personal property filing the creditor will likely be unperfected if the goods turn out not to be fixtures.”)