Disclaimer: The definitions within this glossary pertain the 9th Article of the Uniform Commercial Code (RA-9). This is the portion (article) of the UCC that is relevant to personal property – this being other than real property (land, buildings, or other improved property). For the sake of the market Ground Clearance services heavy equipment is used in the glossary. However liens can be filed on any item of value by the one who has financial interest and has an agreement with the debtor to file that interest as a lien.
Additional Debtor - A secondary name on a lien. This person or company is as liable for paying off the debt as is the primary debtor. Think of it as co-signing.
Amendment - A creditor can change the original financing statement by filing an Amendment. The Amendment can show a change in the debtor name, address, add or remove an additional debtor, change the name and/or address of the secured party (creditor), or add/delete/change the collateral.
Central Filing System - Since revisions to the Uniform Commercial Code in 2000, known as RA-9, each state has a central filing system. The exception is Louisiana where liens are filed in each Parrish (county) but still show up in one filing bank so they can also be searched from any Parrish.
Certified UCC Search - In most states the general UCC search is not a certified search. A certified search is primarily done by staff at the filing office. It is stamped certified or has a certificate stating so. Certified searches are important if the documents may be used in a court case. Certifies searches are very specific to the name on the lien. No wild cards or variance in the names.
Civil Judgments - Civil judgments are filed when one parry takes another to court for various civil matters such as traffic violations, nonpayment of goods or services, or workers compensation. The nonpayment of goods could be a job not completed that included specific equipment.
Collateral - The equipment or other personal property meeting or exceeding the value of a loan or lease. The collateral will be stated on the lien. This may be one piece of equipment which has equity to finance another purchase.
Continuation - A continuation of lien must be filed within 6 months of the lapse date of the original financing statement, also known as a UCC-1. This continues the filing for an additional 5 years from the expiration date. An original financing statement is in effect for 5 years except for Transmitting Utility Liens.
Creditor - The person or company with a financial interest in the collateral (personal property).
DBA - An acronym for “Doing Business As”. John Smith dba Smith Equipment. The company has no legal separation from the owner. The individual is the legal owner of the assets and debts of Smith Equipment. The “company” is not recognized by the state. Liens will be filed under the name of the individual.
Debtor - The person or company responsible for a debt to the creditor for which collateral has been placed in return for that debt.
Effective date - The date the filing office shows the UCC received into their system. Liens are filed in the order they are received. If two creditors have interest in the same collateral, the first to file gets first payoff of proceeds from the sale. The next in line can request any remaining proceeds.
Effective Financing Statement (EFS) - This is known as an Original Financing Statement in other states.
Filing Number - The number assigned by the filing office to each individual filing. This number shows up on the Listings and corresponds with the number on the UCC.
Fraud - Selling equipment under one name when the equipment is legally owned by another. i.e. Jones Builders selling and equipment is owned by Jones Construction.
Involuntary Lien - Filed without the consent of the debtor. Most often these are tax liens.
Lapse Date - The lapse date is 5 years from the filing date.
Lien - A statement of financial interest filed at the appropriate level in a state or county for which the debtor should be notified prior to filing. This statement is in loan or line of credit documents. You authorized having the lien filed when you signed the documents. An involuntary lien may be filed by a court or taxing authority.
Listing - The listing is the portion of the lien search that shows how many liens there are, the filing number also represented on the lien, and the who they are filed against and when they expire. Frequently also shown are the creditor and if there are amendments to the filing.
No Interest - A creditor may provide a letter stating they have no interest in the equipment or the proceeds from the sale of the equipment. This should be on the creditor’s letterhead and signed and dated by the creditor.
Non-titled Equipment - Any motorized unit legal to drive on the road or highway has a title. Machinery which is not legal to drive distances on the roads or highways is non-titled and are trailered for transport. Liens are generally filed only on non-titled machines.
Original Financing Statement - Also known as an Effective Financing Statement (EFS) in some states. This is the UCC-1 filed by the creditor with the appropriate office of the state which secures their financial interest in the collateral (personal property).
RA-9 - This is Revised Article 9. This refers to the revisions made to the 9th Article of the Uniform Commercial Code. The 9th Article secures personal property. The RA-9 created changes more uniformity between the states for where liens are filed and the way information was stated within the lien.
Release of lien - A release of lien from a creditor may be in the form of a UCC release or termination. If the lien has several pieces of equipment listed or a blanket filing, the creditor may provide a letter stating they will release their interest either for 0 (zero) dollars or for an amount. If you receive a payoff, the document should include a date the payoff was provided, the exact dollar amount required, and a per diem (dollars per day) to add to your payment. That amount should be paid by order to whom the creditor states. The creditor needs to follow up with a statement that their interest has been released once payment has been received and credited.
Secretary of State Office (SOS) - The central filing office in nearly all states where UCC’s are filed.
State of Incorporation - The state where incorporation documents are filed. This may or may not be the state where a company does business. The state of incorporation is where liens are filed and found.
Subordination - Subordinating interest in equipment is taking a “back seat” to your interest. It is not releasing interest. Don’t accept a letter stating interest will be subordinated. You want a release.
Tax liens - Tax liens are filed for non-payment of any kind of tax. Tax liens are filed at different offices in different levels of government in each state. They may be filed with a county courthouse with the clerk, a specific office just for taxes, at a district, or even the state level. Some tax liens encumber real and personal property. The lien has to be viewed to know.
Termination - A terminated lien is no longer in effect – if it was filed by or on behalf of the creditor. If the debtor files the Termination, they need to have authorization from the creditor for it to be legal. There is no way to know who filed a termination without seeing a copy of the filing.
Transmitting utility - A person primarily engaged in the business of:
- Operating a railroad, subway, street railway, or trolley bus;
- Transmitting communications electronically, electro magnetically, or by light;
- Transmitting goods by pipeline or sewer; or
- Transmitting or producing and transmitting electricity, steam, gas, or water.
UCC - Uniform Commercial Code. Personal property is secured in the 9th Article of the code. Most of the other articles refer to banking and securities. The revisions made to the article in 2000 are known as RA-9.
UCC-1 - This is the original filing statement. A UCC-1 is filed to show protect the interest in the collateral.
UCC-3 - This is an amendment, continuation or termination of the UCC-1.