Perfection by possession will usually mean the secured party taking physical possession of the collateral. In most cases, this will only be practical for small and valuable items, and where the grantor does not require the day to day possession of collateral to use in any business or operations.

An alternative to the secured party taking physical possession themselves is available only for goods, and involves taking possession through another person as agent or bailee¹.

A secured party could conceivably take possession through a bailee either

1. 1. if the bailee originally has possession of the collateral, and agrees to thereafter hold possession for the secured party as the secured party’s agent or bailee, or
   2. by the secured party instructing an agent to go and take possession of collateral as its agent and bailee.

The bailee through whom a secured party possesses collateral cannot for obvious reasons be the grantor or the debtor².

Taking possession of collateral through a bailee is a form of constructive possession, but as noted above, is only available for goods.