Service Area: UCC Services

UCC Filings: Fixture Filings 101

Posted on June 14, 2016 by - UCC Financing Statements

UCC Filings: Fixture Filings 101

Today’s post is a 101 on fixtures and fixture filings as they pertain to Article 9 of the Uniform Commercial Code. Most variations of UCC filings are fairly easy to explain. A Blanket filing is a security interest in all assets of your customer. A Purchase Money Security Interest filing grants a security interest like a blanket filing, but with the added ability to repossess inventory or equipment. But fixture filings… fixture filings, seem to be a bit more difficult to understand.

First, Define Fixture

The general idea of a fixture filing isn’t necessarily the complicated part; it’s actually determining what constitutes as a “fixture” that can be tricky. Here are the definitions of fixtures and fixture filing under Article 9:

  • What are fixtures? Fixtures are “goods that have become so related to particular real property that an interest in them arises under real property law”. – Article 9-102(41)
  • What is a fixture filing? A fixture filing is “the filing of a financing statement covering goods that are or are to become fixtures and satisfying Section 9-502(a) and (b). The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.” – Article 9-102(40)

What Can Be Considered a Fixture?

Based on the definition under Article 9, it would be anything that is “so related to a particular real property.”

The key is “so related,” which indicates the item isn’t permanent, but is still physically attached to the real property. You will likely notice a theme here: the items are secured to the building or premises, but can be removed if necessary and their removal won’t impact the structural soundness of the building or property. Here are just a few examples of items that could be covered by Article 9:

  • Hotel headboards and external signs
    • Headboards are often affixed to the wall, but could be removed without compromising the physical integrity of the hotel (i.e. a support beam would compromise the hotel, but simply changing out a headboard that is secured to the wall won’t make the building tumble to the ground). Similarly, the signs you see outside the hotel identifying it’s a Holiday Inn or Marriott are attached to the building, but not permanent.
  • Gas/Fuel pumps
    • The pumps you pull up to when it’s time to fill your tank are secured to the ground with bolts (or something similar). If the pump is removed, it doesn’t impact the actual property, as a new pump could be put right back in its place. Another common fixture similar to gas/fuel pumps, would be air tanks that are secured outside places like hospitals. Here in Cleveland, OH, there are Airgas tanks, which can be seen from the highway, that are secured on the backside of the MetroHealth campus. These tanks are affixed to the ground, but they can be removed if necessary.
  • Walk-In Coolers, Ovens, Dishwashers, Air-vent/Oven hoods etc.
    • Equipment often seen in restaurants would likely be considered fixtures. These pieces of equipment are typically secured to the building, whether it’s the floor or the walls, but again, can be removed if necessary.

Filing on a Fixture & Fixture Filing

Fixture filings and filing on a fixture are actually two different filings.

A filing on a fixture is simply a UCC Financing Statement, recorded with the Secretary of State, which includes “fixtures” in the collateral description. This filing does not attach to real property and would not appear in real property records (i.e. the county Assessor’s or Recorder’s Offices).

I tend to think of a filing on a fixture as a typical UCC filing, as it must comply with Article 9 just as blanket filings & PMSI filings do, but the collateral description would include “fixtures.”

Although a fixture filing is still a UCC filing, it is recorded in the real property records, which then turns the security interest into a mortgage or lien against the actual property where the fixture is or will be located. A fixture filing should satisfy Sections 9-502(a) & (b). Section 9-502(b) is key, as it is specific to real property:

(b) [Real-property-related financing statements.]
Except as otherwise provided in Section 9-501(b), to be sufficient, a financing statement that covers as-extracted collateral or timber to be cut, or which is filed as a fixture filing and covers goods that are or are to become fixtures, must satisfy subsection (a) and also:
(1) indicate that it covers this type of collateral;
(2) indicate that it is to be filed [for record] in the real property records;
(3) provide a description of the real property to which the collateral is related [sufficient to give constructive notice of a mortgage under the law of this State if the description were contained in a record of the mortgage of the real property]; and
(4) if the debtor does not have an interest of record in the real property, provide the name of a record owner.

Why record a fixture filing? One excellent reason is because the filing clouds the title of the property. This encumbrance alerts potential buyers/sellers that you need to be paid before the filing will be removed from the property – essentially the filing keeps the property from transferring from one party to another, until the debt is satisfied.

Best Practice

If you are providing items that are affixed to real property, do both a filing on a fixture with the Secretary of State and a fixture filing with the real property records.

Clerk of Courts Rejected UCC Continuation Because Filing Had Already Been Continued

Posted on April 26, 2016 by - UCC Financing Statements

Clerk of Courts Rejected UCC Continuation Because Filing Had Already Been Continued

What happens when you file a UCC-3 to continue your security interest and the county rejects the filing because “CONTINUATION ALREADY FILED ON 07/07/10 #091136583”? Ask for proof!

In Signature Credit Partners, LLC v. Casaic Offset & Silkscreen, Inc. (2012 WL 1999494 (W.D.La.)), Signature Credit Partners, LLC (Signature) lost their security interest when their UCC filing lapsed in 2010, because they failed to file a continuation. But, did Signature fail itself or did the Clerk of Courts fail Signature?

The Facts of the Case

Signature filed a UCC in November 2000, which granted a security interest in a printing press that was in the debtor’s (Casaic’s) possession. The PMSI filing from 2000 was continued by Signature in 2005, and when it came up for continuation in 2010, Signature hired a third party to file the continuation which would then grant them a security interest until 2015.

In 2010, the third party submitted Signature’s continuation to Caddo Parish Clerk of Courts (in Louisiana) but Caddo Parish rejected the continuation because “CONTINUATION ALREADY FILED ON 07/07/10 # 091136583”. This rejection indicated to Signature that their continuation was already filed & they were granted security interest for another five years.

The Fly in the Ointment

In 2011, the debtor, Casaic, filed for bankruptcy protection and it was discovered that Signature’s UCC filing was not continued in 2010. It turns out that the Clerk of Courts made an error in data entry when it entered the continuation filing number into the system. So, when the Clerk of Courts saw that a continuation had already been filed, they were actually looking at a different continuation altogether.

Signature argued that it should be granted the security interest because it was the Clerk of Courts that made the error and led Signature to believe they were secured. Of course, the courts were quite frank in their denial:

“First, there is no dispute that Louisiana law regarding the ranking of liens governs this dispute. Under Louisiana Revised Statute 10:9–515(d), a continuation statement must be filed in the same filing office where the financing statement was originally filed within six (6) months of the expiration of the five (5) year period specified in La. R.S. 10:9–515(a)… Although Signature contends that it attempted to file a continuation statement, the facts are clear that no continuation statement was filed. Therefore, as a matter of law, Signature’s financing statement lapsed on November 21, 2010. La. R.S. 10:9–515(c) provides that if a continuation statement is not timely filed, a security interest is deemed to have lapsed and “upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the financing statement becomes unperfected, unless a security interest is perfected otherwise.”

What Should Have Happened

I asked my coworker, NCS UCC Specialist, what we would do if a continuation was rejected because the filing was “already continued” and she advised

“If the county rejected the filing because it had already been continued we would have talked to the creditor, and we would have spoken with the Parish and obtained a copy of the filing.”

In this case, once the Clerk of Courts rejected the continuation, Signature or the third party should have requested a copy of the continuation – but neither party did. Had they requested a copy of the continuation, it would have been apparent that the filing was not Signature’s filing.

Another Best Practice

We’ve previously recommended that creditors do a reflective search after every UCC filing. A reflective search will assist creditors in ensuring their filing was actually recorded and indexed accurately. You can learn more about reflective searches here.

Consignment UCC Filings and the Sports Authority Bankruptcy

Posted on March 28, 2016 by - UCC Financing Statements

Consignment UCC Filings and the Sports Authority Bankruptcy

A company selling on consignment takes an unnecessary risk when it forgoes filing a UCC-1 Financing Statement. Complying with Article 9-324 of the UCC can protect a creditor from its debtor’s existing creditors and its debtor’s future creditors, because the UCC creates a public record of the creditor’s security interest.

What is a Consignment Filing?

In a previous post we explained the basics of a consignment and you can read that post here (or view the infographic here). Essentially, when a consignment agreement and UCC are filed:

“The consignor/owner retains title to the delivered goods, while the consignee/recipient holds and attempts to sell the goods. If and when those goods are sold, the owner’s security attaches to the proceeds of the sale. If the consignee is unable to sell the goods, they can simply return the goods to the owner.”

Why Would I File a UCC if I’m Selling on Consignment?

Because the law allows you to secure your goods! A simple consignment agreement is often viewed by the courts as a “secret lien” and may not be enough to protect you if your debtor defaults or files for bankruptcy protection, as there is no legal/recorded document identifying your title to the goods provided to the debtor.

If the debtor files for bankruptcy protection, the inventory the debtor has on hand is gathered up and sold off to pay creditors (secured creditors first and then the unsecured creditors). Without the UCC filing identifying you as a secured creditor and specifically identifying your goods, the inventory you supplied automatically becomes property of the estate.

Consignment Sales & the Sports Authority Bankruptcy

This is an unfortunate, yet classic, case of “too big to fail”. Shortly after filing for bankruptcy protection, Sports Authority filed complaints against its creditors, stating these creditors sold on consignment without filing a UCC and are therefore unsecured. (The number of complaints filed by Sports Authority is over 150, some sources say as high as 165.)

The complaints filed by Sports Authority will be used to determine whether or not a creditor is secured and the priority of the creditor. If the judge determines these creditors are unsecured, the inventory in Sports Authority’s possession could be plopped into the pool of items to be sold and the proceeds of that sale will be distributed to secured creditors first.

According to L. John Bird of Fox Rothschild LLP

“If Judge Walrath agrees … consignment vendors will have only a security interest, governed by the Uniform Commercial Code as enacted in Delaware and the principles of bankruptcy law.  Pursuant to the Post-Petition Financing order entered in these bankruptcies, the Debtors have given their DIP Lenders a first-lien security interest in all assets not otherwise encumbered by a perfected lien. This means that for any shipments that were not properly perfected (by filing a UCC-1 statement within 30 days of shipment), the consignment vendors may not have a 1st priority lien.”

Sports Authority is a large company with creditors like Nike & Under Armour. Creditors selling to these large companies often have a false sense of security… “Eh, I don’t have to file a UCC, Sports Authority is a large company, they will pay.”

Is a UCC Filing Required?

Short answer: No. Creditors are not required to file a UCC. In default or bankruptcy situations, when a creditor is selling on consignment, there is a slight chance the creditor could argue it’s common knowledge that the debtor engages in consignment sales.

But making that argument seems shaky at best, not to mention inefficient – how much time would it take to successfully make that argument vs. filing the UCC and granting a security interest at the beginning of the relationship?

Best Practice

If selling on consignment, execute a security agreement & ensure it includes clear identification of inventory, search for existing secured creditors & notify those creditors of your security interest, file the UCC-1 in the appropriate jurisdiction(s) – if possible, and file the UCC prior to the debtor taking possession of the inventory.

Don’t neglect a simple opportunity to be a secured creditor.

Filing UCCs: Tips for Secured Parties

Posted on March 7, 2016 by - UCC Financing Statements

UCC Filings: Top Tips for Secured Parties Facing Possible Debtor Name Change

As all secured creditors know, maintaining perfection of their security interests under UCC Article 9 is essential to ensuring priority over other claimants. Unfortunately, there is a common event that can quickly eliminate the perfection of a security interest: a debtor name change. Article 9-507(c) of the UCC provides the secured party with a four month window to amend a UCC filing if the debtor’s name changes:

§ 9-507. EFFECT OF CERTAIN EVENTS ON EFFECTIVENESS OF FINANCING STATEMENT.
(c) [Change in debtor’s name.]

If the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under Section 9-503(a) so that the financing statement becomes seriously misleading under Section 9-506:

1. the financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four months after, the filed financing statement becomes seriously misleading; and

2. the financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four months after the financing statement became seriously misleading.

We’ve previously discussed the importance of monitoring your customers for changes in their name as well as for changes with their status with the Secretary of State. Today we have some tips for you!

Tips for Secured Parties Facing Possible Debtor Name Changes

The following tips are courtesy of Ms. Mary Cowan, NCS President and Professor Margit Livingston, DePaul University College of Law, and were originally featured in  Debtor Name Changes Under Article 9: The Importance of Keeping Financing Statements Current and Accurate.

  • Tip #1: Incentivize
    Incentivize your debtor to keep you informed. In the security agreement, the debtor should agree to inform you of any planned name changes and/or relocations [specify number of days] in advance. Failure to do so should constitute default, allowing the security party to call in the debt.
  • Tip #2: Examine Payments
    Examine the payments made by the debtor. If the debtor has been sending payment checks that reflect a certain name or address and that information changes, you should immediately contact the debtor for clarification.
  • Tip #3: Monitor Corporate Status
    Every three months check the state corporate registry where your debtor is listed. A change of name or status will be indicated on the registry.
  • Tip #4: Stop Credit
    Do not advance additional funds to the debtor beyond the original credit limit amount without verifying the debtor’s current name, address and business form.

It’s a Challenge

We recognize that keeping track of debtor name changes can be challenging, but it is worth the effort: loss of a perfected status is a prospect that no secured party wants to face!

Billion Dollar UCC Mistake Will Make You a Better Credit Manager

Posted on February 8, 2016 by - UCC Financing Statements

How JP Morgan Chase Bank’s Billion Dollar UCC Filing Blunder Can Make You a Better Credit Manager

By now you have likely read thousands of articles and heard just as many news reports about JP Morgan’s “accidental UCC-3 Termination” – perhaps not thousands, but it was a widely covered topic in 2015. After all, accidentally terminating a UCC filing made JP Morgan an unsecured creditor – a $1.5 billion unsecured creditor.

Background

Here’s the unofficial “CliffsNotes®” version of what happened. (You can find full text of the case here) General Motors Corporation (GM) had two separate finance agreements with JP Morgan Chase Bank (JP Morgan). One agreement was for $300 million (a synthetic lease) and the other was for $1.5 billion (a term loan), both agreements were secured by different collateral and there was a UCC-1 filed for each.

GM paid off the $300 million, and subsequently asked their counsel to prepare the UCC-3 Termination. A representative with GM’s counsel ran a UCC search to locate the financing statement to be terminated, three results were returned with the search and the representative included all three with the termination filing.

Unfortunately, of the three filings included, one was the term loan for $1.5 billion which had not been paid in full.

The drafted paperwork was reviewed by GM’s counsel and forwarded to JP Morgan’s counsel, who also reviewed it – even signed a few documents – and the paperwork was then filed, “unknowingly terminating” JP Morgan’s security interest in the $1.5 billion.

None the wiser, until…GM filed for bankruptcy protection. Once the petition was filed, JP Morgan discovered the $1.5 billion unsecured debt and heads began spinning.

It was Simply an Accident, Right?

Yes, it was an accident, but no, it’s not simple. After GM filed for bankruptcy, and the unsecured debt came to light, JP Morgan advised the creditor’s committee that the UCC securing the $1.5 billion was terminated accidentally. (Even GM allegedly said they never intended to terminate this filing)

Through lengthy hearings and court of appeals processes, it was determined that whether the termination filing was intentional was irrelevant, because the termination was executed and therefore, the security interest was extinguished.

Don’t “Pull a JP Morgan”

When I say, don’t “pull a JP Morgan” I mean, don’t sign something without proper review – it doesn’t matter how many people reviewed it before you, if you are going to sign something, review it.

In this case, several parties “reviewed” and signed off on these documents, but clearly no one truly reviewed the documents, they simply relied on a belief that the person before them reviewed it. There was a checks/balance system in place, but that only works if the parties actually do the checks!

You Will Be a Better Credit Manager

Keep this case in mind when you establish a new UCC filing process or modify your current process. UCC filing requires concise & correct information and, as in the JP Morgan case, leaves very little to no room for error.

It’s important to correctly identify the involved parties, the collateral etc., but it’s crucial to review a filing carefully before recording it. Don’t leave the task of UCC filings to one person. At the very least, have one person prepare the documents and a separate person carefully review the documents before filing.

When I was in grade school, our teacher would have us exchange our papers with a classmate to proofread, make changes, correct errors, before turning the document in for a grade. Same thing should go for financing statements: Review. Review. Review. And then review it again.

Articles of Incorporation Play a Key Role in Your UCC Filing

Posted on January 19, 2016 by - UCC Financing Statements

Articles of Incorporation Play a Key Role in Your UCC Filing

Clients frequently ask:  “My customer’s name is on our agreement and I ran a query on the Secretary of State website; why do I need to pull the Articles of Incorporation too?”

Previously, we’ve mentioned that Articles of Incorporation are used to determine jurisdiction (see Articles of Incorporation: Not Just for Name Verification). In today’s example, Articles of Incorporation are important because even states make mistakes when indexing entities (more often than you’d think).

The first image is from the Ohio Secretary of State’s website. The search performed was for “J & J Flooring” and the returned result indicates the corporate legal name is “J & J Flooring, Inc.” so that’s what the creditor used on their credit application.

But look closer….

A screenshot showing the result of searching J & J Flooring on the Ohio Secretary of State's website. The Business Name row is marked with a red box and the Filing Type is marked with a red arrow.Under “filing type” the state indicates J & J Flooring is a Limited Liability Company, which is commonly referred to as an “LLC”.

So, which is it? “J & J Flooring, Inc.” or “J & J Flooring, LLC” — the only way to know for sure is to pull the Articles of Incorporation! Article 9 requires the debtor’s legal name, state of organization and the organization ID number – all three items are found on the Articles of Incorporation.

OK, here’s a look at the Articles of Incorporation. Drum roll please… aha! The entity’s corporate legal name is, in fact, “J & J Flooring, LLC”:

A screenshot showing the Articles of Incorporation for J & J Flooring with a red box around the official corporate legal name being J & J Flooring, LLC.

“Why can’t I just list ‘J & J Flooring’ on the filing, that way it will cover both ‘Inc.’ and ‘LLC’?” Because you can’t have your cake and eat it too.

We’ve previously discussed the importance of filing a UCC with the correct legal name, in fact, we specifically discussed a case where the creditor left “Inc.” off of the debtor’s name and the security interest was left unperfected. You can read more about that case here –  What a Difference a Name Makes: Omission of “Inc.” Left Security Interest Unperfected.

It’s all about the standard search logic, and though you may think “Inc.” and “LLC” are what are sometimes referred to as noise words, they are still words – don’t jeopardize your position; pull and review Articles of Incorporation carefully!

Have questions? NCS UCC experts are here to help!

Ontario PPSA Amendments

Posted on December 15, 2015 by - UCC Financing Statements

The 2006 Amendments are Coming to Fruition for the Ontario PPSA

The 2006 amendments to Ontario’s Personal Property Security Act (PPSA) are set to become effective by the end of the year.

Initially I thought “…the amendments passed nearly 10 years ago, and now there is a random rush to implement them?” Apparently I wasn’t alone with this thought. The same surprise appears right in the title of an article by Margaret Grottenthaler & Kelly Niebergall of Stikeman Elliott LLP: “A Little More Notice Please! Amendments to Ontario PPSA Debtor Location Rules Effective December 31 May Require Additional Registrations”

What’s changing?

As you may know, the PPSA is registered in the jurisdiction where the debtor’s “chief executive office” is located.

Unfortunately, “chief executive office” was not well defined under current statute, and by “well defined” I mean not defined at all. Creditors had difficulty in identifying the chief executive office, especially when business structures vary, as Grottenthaler & Niebergall pointed out:

“The background of the 2006 amendments (which are now to be brought into effect) is that there had been criticism of the existing Ontario PPSA debtor’s location definition, on the grounds that the whereabouts of a debtor’s chief executive office is not always obvious given that it is not generally identified on a public record. In addition, the location of the chief executive office can be difficult to determine in the context of partnerships and trusts that may be managed by persons in a variety of jurisdictions or in the case of entities that do not have a specific physical location from which they conduct business.”

How will the 2006 amendments clear up jurisdiction confusion?

The jurisdiction will be determined by the entity type. Grottenthaler & Niebergall provide a great chart which lists the debtor type and jurisdiction side by side.

This is a sample of the chart, Stikeman Elliott LLP, posted on their blog – in this example, if the entity is a corporation, the location of the debtor is where it is incorporated.

Type of Debtor Entity: Corporation, limited partnership or organization organized under the laws of a Canadian province or territory, as disclosed in a public record Location of Debtor: Its province or territory of organization

What if I have PPSAs currently registered? What if I just registered a PPSA in Ontario? 

If you have registered a PPSA in Ontario, you have a few options. Technically there is a grace period for these amendments, much like what we saw when UCC Article 9 was amended – and the grace period is 5 years (again, just like the UCC).

  • Option 1: you could leave your registered PPSA as is and review it sometime over the next 5 years to ensure you have it registered in the proper jurisdiction. (or)
  • Option 2 – The Preferred & Recommended Best Practice: review all existing PPSAs now, and confirm they are registered in the proper jurisdiction. If, in your review, you determine that a PPSA is not registered in the proper jurisdiction, you should amend the PPSA after the first of the year.

We aren’t the only ones recommending you review now as opposed to later – Robert M. Scavone & Maria Sagain, of McMillan LLP make the same recommendation:

“Although in most cases the amendments will provide a five-year grace period to perfect security interests under the new rules, secured parties should avoid being caught by surprise on December 30, 2020 and should begin reviewing existing registrations well in advance of that date to identify which ones will need to be “refreshed” during the grace period. Secured parties will also need to develop new due diligence procedures to ascertain the debtor’s location in accordance with the new rules for all PPSA registrations and searches done after December 31, 2015.”

You can read their full coverage of the Ontario PPSA amendments here: “Where’s Waldo: New Ontario PPSA Debtor Location Rules Finally Coming into Force”

Best Practices

Review all filings now, register a PPSA in the debtor’s jurisdiction and in the jurisdiction in which the inventory is located, and don’t go it alone! NCS UCC experts are here to help

A Primer on the Primary UCC Forms

Posted on November 2, 2015 by - UCC Financing Statements

A Primer on the Primary UCC Filing Forms

1, 3, 11… Confused counting? Of course not, silly, these numbers identify the various types of UCC filings under Article 9 of the Uniform Commercial Code (UCC). As you may already know, UCCs provide an opportunity for trade creditors to collateralize or “secure” their goods and/or accounts receivable, by leveraging the personal property assets of their customer.

Here’s a quick overview of the three primary UCC forms.

UCC-1: the Original

This is the initial UCC filing, which represents the granting of the security interest.

  • It must* include:
    • Your company (aka the secured party) name & address
    • Your customer’s (aka the debtor) name & address
    • The collateral description
  • It’s good for 5 years (10 years in Wyoming and up to infinity in Canada)

*It’s important to note, if you neglect to include one of these required bits of information, the filing will be rejected.

UCC-3: the Change

This UCC form is used to continue an existing filing, change information on an existing file or to terminate an existing filing. To change information on a UCC filing and to terminate a filing are pretty straightforward, but let’s dig a little deeper into the continuation.

What is a UCC Continuation?

If you perfect a security interest through UCC filings, you probably know that a UCC filing is good for five years (except in Wyoming, where it’s ten years and in Canada, where the PPSA can actually be infinite). So, what happens if the five years is up and you are still extending credit to your customer? You should continue your filing. Timely continuance of a UCC filing maintains your security & priority.

Here are a few other things you should know about continuations:

  • The five year anniversary of your filing is the “lapse” date aka expiration date. i.e. If the original filing was recorded 07/07/2014, then the continuation needs to be filed by 07/07/2019.
  • To maintain your secured position, you should continue your filing before the lapse date. If you haven’t filed the continuation by the time the lapse date arrives/passes, you have to file a brand new UCC which means you forfeit your priority position.
  • Don’t file your continuation too soon! A continuation can only be filed within six months of the lapse date – if you file it too soon or too late*, the recording office will reject the filing. i.e. If the lapse date is 07/07/2019, the earliest you can file the continuation is 01/07/2019.

*There is no wiggle room, so make sure you file timely.

“If my original UCC was filed July 1st and I record the continuation on February 1st, is my new renewal date February 1st?”

No. Your renewal will always be the date of the initial filing – for this example, it will always be July 1st.

UCC-11: the Search

This UCC filing is an “epic-information-dig”. Here are a few reasons why creditors, or other interested parties, may run a UCC search:

  • To determine if there are other secured parties on a particular debtor.
    • This can be helpful when a creditor needs to send notification letters to these other parties.
  • To determine if specific collateral is already secured by a UCC filing.
  • To determine a creditor’s priority (i.e. are they 1st, 2nd… 13th…).

Some creditors find the Search to be quite useful when they are requiring a customer to sign a security agreement, and the customer says “None of my other vendors make me sign these!”

When running searches as a part of a credit approval process, it arms the creditor with information on whether or not other parties are filing UCCs against their customer – with the search information, the creditor could say “Actually, XYZ Inc. asked you to sign a security agreement and subsequently filed a UCC, in order to protect their rights. We are simply following a streamlined credit approval process, which will have no negative impact on you, unless you were to default.”

Need help with UCCs? NCS has you covered!