                                 CODE OF VIRGINIA

RIGHTS AND DUTIES OF SECURED PARTY HAVING POSSESSION OR CONTROL OF COLLATERAL
(§ 8.9A-207)

a. Duty of care when secured party in possession. Except as otherwise provided
in subsection (d), a secured party shall use reasonable care in the custody and
preservation of collateral in the secured party&#8217;s possession. In the case
of chattel paper or an instrument, reasonable care includes taking necessary
steps to preserve rights against prior parties unless otherwise agreed.

b. Expenses, risks, duties, and rights when secured party in possession. Except
as otherwise provided in subsection (d), if a secured party has possession of
collateral:

   1. reasonable expenses, including the cost of insurance and payment of taxes
   or other charges, incurred in the custody, preservation, use, or operation of
   the collateral are chargeable to the debtor and are secured by the collateral;

   2. the risk of accidental loss or damage is on the debtor to the extent of a
   deficiency in any effective insurance coverage;

   3. the secured party shall keep the collateral identifiable, but fungible
   collateral may be commingled; and

   4. the secured party may use or operate the collateral:

A. for the purpose of preserving the collateral or its value;

B. as permitted by an order of a court having competent jurisdiction; or

C. except in the case of consumer goods, in the manner and to the extent agreed
by the debtor.

c. Duties and rights when secured party in possession or control. Except as
otherwise provided in subsection (d), a secured party having possession of
collateral or control of collateral under § 8.7-106, 8.9A-104, 8.9A-105,
8.9A-105.1, 8.9A-106, 8.9A-107, or 8.9A-107.1:

   1. may hold as additional security any proceeds, except money or funds,
   received from the collateral;

   2. shall apply money or funds received from the collateral to reduce the
   secured obligation, unless remitted to the debtor; and

   3. may create a security interest in the collateral.

d. Buyer of certain rights to payment. If the secured party is a buyer of
accounts, chattel paper, payment intangibles, or promissory notes or a
consignor:

   1. subsection (a) does not apply unless the secured party is entitled under an
   agreement:

A. to charge back uncollected collateral; or

B. otherwise to full or limited recourse against the debtor or a secondary
obligor based on the nonpayment or other default of an account debtor or other
obligor on the collateral; and

   2. subsections (b) and (c) do not apply.

HISTORY: 1964, c. 219, § 8.9-207; 2000, c. 1007; 2004, c. 200; 2024, c. 652.