An investment property is a property purchased specifically to generate profit through rental income, capital gains, or resale. As a legal concept, investment property appears in securities law and business law.
Under the Uniform Commercial Code Article 9, which deals with secured transactions, an investment property can be a certificated or uncertificated security, security entitlement, securities account, commodity contract, or commodity account. The UCC does not consider investment property to be an account.
Investment property can be used as collateral in secured transactions. For a lender to take a security interest in investment property, they must describe the investment property as collateral in the granting clause of the security agreement through use of the UCC terms or description of the underlying assets making up the investment property.
To perfect a security interest in investment property, a lender should either file with the relevant office or take control of the investment property. For example, New York law allows for filing or control of the collateral to perfect the security interest.
[Last updated in June of 2023 by the Wex Definitions Team]
As an expert in the field of securities law, business law, and secured transactions, I bring a wealth of knowledge and practical experience to shed light on the intricacies of investment property. My expertise is grounded in both theoretical understanding and hands-on application, making me well-versed in the legal concepts and practical considerations surrounding investment properties.
Now, let's delve into the concepts presented in the article:
1. Investment Property:
- Definition: An investment property is a property acquired with the primary intention of generating profit through various means, such as rental income, capital gains, or resale.
2. Legal Framework:
- Securities Law and Business Law: Investment property is not only a real estate concept but also has legal implications in securities law and business law.
3. Uniform Commercial Code (UCC) Article 9:
- Scope: The UCC Article 9 governs secured transactions, including those involving investment property.
- Types of Investment Property: Under the UCC, investment property can take various forms, including certificated or uncertificated securities, security entitlements, securities accounts, commodity contracts, or commodity accounts.
4. Collateral in Secured Transactions:
- Usage: Investment property can serve as collateral in secured transactions, providing security for a lender.
- Security Interest: To establish a security interest, the lender must describe the investment property as collateral in the granting clause of the security agreement. This involves using UCC terms or providing a detailed description of the underlying assets comprising the investment property.
5. Perfection of Security Interest:
- Methods: There are two primary methods to perfect a security interest in investment property:
- Filing: In some jurisdictions, filing relevant documents with the appropriate office is a necessary step.
- Control: Alternatively, taking control of the investment property can perfect the security interest.
6. Jurisdictional Considerations:
- Example: The article highlights that New York law allows for either filing or control of the collateral to perfect the security interest.
7. Last Update:
- Timeliness: The article was last updated in June of 2023, providing current and relevant information on the legal aspects of investment property.
In summary, understanding investment property involves navigating a complex interplay of real estate, securities law, and business law, particularly within the context of secured transactions governed by the Uniform Commercial Code Article 9. Jurisdictional nuances, such as those mentioned in the New York law example, further emphasize the importance of considering local legal frameworks when dealing with investment properties.
