Article 9 — Secured Transactions · Section 9-331
UCC § 9-331 outlines the priority of secured parties over collateral in the case of certain purchase-money security interests.
Source: U.C.C. § 9-331
A security interest in collateral is subordinate to a purchase-money security interest in that collateral if the purchase-money security interest is perfected when the debtor receives possession of the collateral, and the purchase-money security interest also meets the requirements of Section 9-310.
UCC § 9-331 establishes rules regarding the priority of security interests when a debtor has multiple secured creditors. Specifically, it asserts that a purchase-money security interest may take precedence over other security interests if certain conditions are met regarding perfection and possession.
A security interest that enables a lender to obtain priority over other security interests when the financing is used to acquire the collateral.
The process of legally establishing a security interest's priority against third parties.
Example 1
A borrower secures a loan to purchase a car and gives the lender a PMSI in the vehicle. This PMSI will have priority over other liens on the car.
Example 2
A business purchases machinery with financing designed specifically for the acquisition. The lender's PMSI in the machinery will take precedence over any other existing security interests in the same equipment if properly perfected.