Kate moved to Columbia, Missouri, in 2004 in order to attend college. She found a nice apartment near campus on Craig’s List and contacted the landlord, Sam. When Kate visited the apartment, she was so impressed that she immediately agreed to rent the property from Sam. Sam went over the terms of the rental agreement with Kate, and told her that his standard policy was to take an Article 9 security interest in the tenant’s property to secure the payment of rent. Kate didn’t know what Article 9 was but was so excited about the apartment that she signed the rental agreement on the spot. Sam properly perfected the security interest by filing a financing statement.

Four years later, Kate graduated and prepared to move to St. Louis, where she had a job lined up. She told Sam that she would be moving out in August and he replied that she better find $3,200 before she moved out, as she had missed four rent payments ($800 each). Kate didn’t think that there was anything that Sam could do to make her pay other than not return her $950 security deposit, but she decided to talk to an attorney nonetheless. If you were the attorney Kate approached, what would you tell her?

1) Sam has no valid security interest because Missouri no longer recognizes the landlord’s lien.

2) Sam has no valid security interest because his security interest has lapsed.

3) She should pay the rent unless she wants Sam to be able to seize her property for violating the terms of the Rental Agreement.

4) Sam has no valid security interest because by taking a security interest in her personal goods, Sam violated the FTC rule regarding security interests in household goods.