Also known as:seller retention of title · retention of title by seller · retention of title · reservation of title · ROT clause
Written by attorneys · grounded in primary & secondary sources — see below
A reservation of title by a seller of goods after delivery to the buyer. The Uniform Commercial Code treats this reservation as creating a security interest in the goods that secures the buyer's obligation to pay the purchase price and subjects the interest to Article 9 rules on attachment, perfection, and priority.
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Uniform Acts
Course Outlines
How it applies
Common Examples
2
Equipment Sale With Retained Title
Sierra Solutions sold specialized assembly equipment to Sebastian Santos under a three-year installment contract that expressly reserved title in the seller until Santos completed all payments. Santos took delivery and installed the equipment in his factory. When Santos later defaulted, Sierra Solutions asserted its retained interest against Santos's other creditors. The retained title operated as a security interest in the equipment, giving Sierra Solutions an Article 9 interest that attached upon delivery and required perfection steps to prevail in priority disputes.
Consignment Treated As Security
Sterling Manufacturing delivered inventory to Simone Sanders's retail store under a written consignment agreement that reserved title in the manufacturer until the goods were sold. Sanders displayed the goods as part of regular stock and paid only after resale. When Sanders's lender claimed a blanket security interest in all inventory, Sterling Manufacturing's retained title was recharacterized as a security interest in the consigned goods. The interest attached to the specific items and required compliance with Article 9 perfection rules to maintain priority against the lender.
In re Schley509 B.R. 901, 907-13 (Bankr. N.D. Iowa 2014)
Common questions
Frequently Asked
4
Does a seller's retention of title after delivery create an enforceable security interest under the UCC?+
Yes. The UCC expressly provides that the retention or reservation of title by a seller of goods after delivery is limited in effect to a reservation of a security interest. This interest arises under Article 2 but falls within the scope of Article 9, allowing the seller to enforce it as collateral for the unpaid purchase price once the goods are delivered.
Supporting sources
Must a seller who retains title file a financing statement to perfect its interest?+
It depends on whether the special Article 2 rules apply. A security interest arising under Article 2 remains enforceable and perfected without a separate authenticated security agreement or filing while the buyer has not yet obtained full possession, but once the buyer takes possession the ordinary Article 9 requirements generally apply.
Supporting sources
How does a seller's retained title affect priority against a lender with an after-acquired property clause?+
The retained title creates a security interest that can compete with the lender's interest. If the seller perfects timely and satisfies any purchase-money notification requirements, its interest may take priority. Otherwise the lender's perfected interest usually prevails under standard priority rules.
Supporting sources
Does labeling an agreement a consignment or reservation of title prevent the interest from being treated as a security interest?+
No. The UCC looks to the substance of the transaction rather than the parties' labels. When a consignor or seller retains an economic stake that secures payment, the interest is recharacterized as a security interest subject to Article 9 regardless of how the contract is titled.
Supporting sources
Real PropertyReal estate contracts · Equitable conversion (including risk of loss)UBEFoundational