Why do a lien search?
The purpose of a lien search is to uncover undisclosed debt. In a perfect world, disclosing debt would be the equipment seller’s responsibility, not fall to the buyer. Unfortunately, that’s not always the case. A signed statement that the equipment is free & clear of encumbrance is something you take to court, not something that keeps you out of court. Never accept these statements as truth.
Every applicable secured creditor should provide a lien release detailing the specific equipment being purchased. Because the lien follows the machine.
If there is an active lien on the equipment or on the debtor that you are unaware of, it doesn’t mean that the lien doesn’t exist. The seller may be under the impression that the equipment is financed with one place, but it may be held as collateral elsewhere, including as a line of credit at a bank. Some companies have investors who file a UCC. Each secured creditor which may have interest should be contacted release their interest in the collateral being sold.
Creditors have priority by the date they filed. The oldest filing gets first dibs to proceeds from your sale. After the first creditor obligations have been fulfilled, any remaining funds from sale carry over to the next creditor… and the next… until all have released their lien or provided a payoff. The seller should request these documents from their creditors.
Legally, one cannot contact anothers creditors without their written authorization. The seller can request the releases from the creditor.
Ground Clearance gives buyers, sellers, auctioneers, and brokers the tools needed to get a deal done. With a wide range of services from locating and retrieving the UCCs to working with the seller’s and their creditors. Ground Clearance helps to ensure that you receive the lien releases or payoff’s, including termination, from all of the applicable secured parties.
Brokers and Auctioneers: As an independent third party do you conduct lien searches on the consigned sellers? Do you clear all applicable liens? Ground Clearance provides these services to free up your valuable time and also relieves your company of the liability of locating and retrieving the information.
Liens are located in the state of incorporation of a business and the state of primary residence of an individual.
What Ground Clearance does for you:
- We give you the tools needed to get a deal done.
- We verify the state of incorporation to make sure we are searching in the correct jurisdiction.
- You will receive the information you request within 72 hours – or be notified if this is not possible.
- You will receive a listing of all liens filed along with the copies you request.
- Information comes to you by e-mail. Not courier or post. This saves time and money.
- The information you receive may include a summary of liens to pay special attention. It is you responsibility to review all the information you receive.
- We can assist with the creditor contact and release documents at a special rate
- Ground Clearance works with brokers and other third parties to ensure the buyer gets the information they need regarding the equipment and lien status while keeping the seller information confidential.
- We are a viable outsource for all your lien search and creditor contact needs. From doing the research, checking the liens for the equipment of your interest, to making certain you have the documentation from all applicable creditors. At a rate of $65 an hour we will take this task off your hands.
Types of liens
Purchase Money Secured (PMSI)
This lien state it is Purchase Money Secured and lists the equipment it is securing
Specific Equipment Lien
This lien states the equipment also, but is not purchase money secured. It may be equipment used as collateral for other purposes.
A blanket lien state “All assets.” Or “All equipment, inventory, machinery..”
A manufacturers blanket states they have an interest in all equipment, parts, accessories, etc. from their manufacturing or sales. Be aware sometimes they encumber all equipment – not just their own brand.
A mechanics lien is filed to state their interest in equipment work has been done but not paid for.
A bond, or surety bond, is filed when several companies are involved in completely one project. A bond holds each party responsible for their portion of the work to be performed. These usually state the equipment purchased for the job is included in the lien. These lienholders should always be contacted to ensure equipment is not being sold out from under the job it was purchased to do.
The Small Business Administration should always be contacted by their debtor. Historically, they have a lot of paperwork and time involved in getting the equipment released from their collateral list. Even if equipment is sold in the regular course of business.
A UCC filed on a lease is always a good idea. It keeps the equipment from being sold out from under the owner. If you lease a car you do not have the right to sell. Equipment is no different in this aspect. The leasing company may authorize the sale for the proceeds. You may need to sign a contract with the leasing company, not the originalseller. Be aware: the leasing company has lienholders too. If you are purchasing from the leasing company you will still want a lien search conducted and the creditors contacted.
There are as many kinds of tax liens as there are taxes. Some state they encumber all real and personal property. Seeing the lien is the way to know. If a tax lien exists, a request for discharge is in order. The agent on the lien can provide a form. Ground Clearance also carries requests we can alter to suit your need.
The tax department may not request the proceeds. Some liens were paid off and not terminated. If the debtor has been making payments they may grant the release.
Civil Judgments are filed at the county level of the state. By checking the civil judgments you learn, not only what kind of a business person you are dealing with, but if the equipment has been named in a judgment. Unless otherwise requested, Ground Clearance retrieves judgments as defendant only, active only, and non-real estate related judgments to save the retrievers time and your expense.