The UCC-1 filing that perfects a lender's security interest in personal property and fixtures, filed with the state and sometimes the county records.
The longer version
A UCC financing statement, commonly called a UCC-1, is a public filing that perfects a lender's security interest in personal property. Filing it puts other creditors on notice and establishes the lender's priority in that collateral against later claimants.
In a commercial real estate loan the mortgage covers the land and building, and the UCC filings cover the rest: furniture, fixtures and equipment, accounts, and in some structures the rents and reserves. The central filing goes to the Secretary of State in the borrower entity's state of organization, which is a rule that surprises people when the property is somewhere else. A separate fixture filing is recorded in the county land records where the property sits.
Filings do not last forever. A financing statement generally lapses five years after filing unless a continuation is filed in the six months before it expires, and a long-dated loan needs that tracked. At payoff, a termination statement releases the filing.
Before closing, the lender runs UCC searches against the borrower to find prior filings that need to be terminated or subordinated. After closing, the filed acknowledgment is a trailing document that belongs in the binder, and it is one of the items most often missing at exam.
Common questions
- What is a UCC financing statement?
- A public filing, usually a UCC-1, that perfects a lender's security interest in a borrower's personal property and gives notice to other creditors. In a real estate loan it covers collateral the mortgage does not, such as equipment, fixtures and accounts.
- Where is a UCC-1 filed?
- With the filing office, usually the Secretary of State, in the state where the borrower entity is organized, regardless of where the property is. A fixture filing is also recorded in the county where the real estate sits.
- How long does a UCC filing last?
- Generally five years from filing. It must be continued within the six months before it lapses or the security interest becomes unperfected, so long-term loans need continuation dates tracked.
- What is the difference between a UCC-1 and a fixture filing?
- A UCC-1 filed centrally perfects a security interest in personal property. A fixture filing is recorded in the real property records to perfect an interest in goods attached to the land, giving notice to anyone searching title.
- The CRE due diligence checklistEvery phase of diligence, organized the way deals close.
- The post-closing audit trailWhat examiners ask for and how to have it ready.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- Loan closing softwareWhere this item is cleared before funding.