Who Do You Trust? The Lien Follows the Machine
Did you know that Ground Clearance and NER (IRONcheck) work together to give you an additional layer of support when making your equipment deals? Every piece of equipment on a search request also goes through the NER database looking for history on the machine.
Not long ago a customer requested a search, and a blanket lien was located. A search from NER showed a lien in a different state. Due diligence showed it was an active lien filed just two years ago.
The previous owner (before the current seller) was contacted. They purchased the machine at a well-known auction house and assumed it to be free and clear for that reason.
The auction house guaranteed the unit free and clear up to the purchase price at the time of the auction. The machine was now selling for considerably more, and my customer was about to be on the hook for the overage due to a lien that was not terminated. The story ends well. It took a few days, but the matter was cleared up. Trust but verify!
The truth is most creditors do not file terminations when a note is paid off.
Some mail a copy of the termination to the customer to file. Most, however, do not follow through.
Why is this important?
Because an open lien can be used again.
If the lien reads: “The following and all substitutions, replacements, additions & accessories thereto now owner or hereafter acquired and proceeds thereof,” this opens a way to reusing the lien.
- When you pay on a piece of machinery holding a note, whether it is a piece you own or a piece you are buying, verify the creditor has terminated the lien. Request a copy of the filed termination.
- Request a lien search when buying, brokering, or taking a piece in on trade to verify there are no open liens that might be relevant to the machine.
- Buying from a dealer, dedicated or not and regardless of size, does not guarantee you are buying free and clear. Ask if they search further than their own database. They shouldn’t be offended and will still do business with you. Tell them about Ground Clearance. We can help them do a better job too.