Understanding UCC liens. How to search, file and enforce UCC liens.

UCC LIENS

What is a UCC lien?

UCC is an acronym for “Uniform Commercial Code.” It is law that was established in 1952 as part of the federal interstate commerce laws so that the states and U.S. territories that adopt the code have a uniform set of rules by which interstate business activities are governed in America.

Most states have adopted the UCC, but it is worthy to note that rules can vary based on how the state adopted the rules and on each state court’s interpretation of those rules. Article 9 of the UCC outlines the rules for handling negotiable instructions, i.e., checks and bank notes, and transactions where personal property (not real estate) is put up as collateral to secure business loans. A UCC-1 lien, aka known as a UCC-1 filing statement, is a written notice filed by the lender/creditor with the relevant state’s Secretary of State office that it has an interest in the designated personal property.  The borrower executes what is called a security agreement to secure the lender’s interest in the collateral and outline the terms of the transaction.

How is a UCC lien filed?

The Secretary of State office in each state provides forms and instructions to file a UCC financing statement. However, because of the numerous legal nuances involved, many lenders/creditors choose to hire an attorney.  Large businesses sometimes use a third party service to handle the filing and management of UCC liens. For example, Lien Solutions, a subsidiary of Wolters Kluwer or CSC Lien Perfect.

How is a UCC lien enforced?

Article 9 of the UCC contains provisions about the collection and enforcement of UCC liens. However, many key terms and conditions are found in a well-written security agreement and effected by the relevant state court case law. The American Bar Association published a legal article that summarizes remedies, collection, enforcement, and other important provisions relating to UCC liens.  See Remedies Outside the Box: Enforcing Security Interests Under Article 9 of the Uniform Commercial Code.

How do I search for a UCC lien?

You may search for UCC liens and obtain copies of UCC filings from each state’s Secretary of State office for a small fee. However, individuals and businesses who want to search every state often choose to use a third party to conduct one nationwide search. U.S. TitleRecords and U.S. Debt Research both offer a time-saving service that searches for UCC liens nationwide
for significantly less than the total fees for all states.

Should I search for a UCC lien if I am buying real estate?

It is never a bad idea to be thorough when you are researching a property to consider a purchase. What does the seller owe on the property? What kind of debts does the seller have generally? Are there solar panels on the property? If yes, are the solar panels paid in full or is there a UCC lien securing the panels as collateral for the loan to the pay for the panels?  If the solar panels are not paid in full, does the seller plan to pay for them at closing or will the seller ask the buyer to take over the payments? Knowledge empowers the buyers to make calculated offers and closings generally run smoother.