Real estate owned by the debtor or an associated client is often the best candidate for security. Real estate security is not the responsibility of the UCC, but of other state laws. As a result, they are not discussed in this scheme, but do not forget about collateral in real estate as a possibility. The security agreement set out in the annexes relates to immovable property. The law on immovable property security varies from state to state. Caution is advised and the help of a lawyer is probably necessary. When a lender files a UCC-1 with the appropriate Secretary of State – that is, the Secretary of State of your state of residence or the state where your business is registered or organized – the lender is said to «perfect its security.» Legally, this means that the lender can assert the privilege in a state court with minimal effort. In cases where the collateral is tied to a specific physical asset and not to financial assets, UCC-1 is deposited in the district where the physical property is located. UCC-1 becomes a public document that allows potential creditors to see if a particular asset is already pledged against an existing lien. Even if you are about to go «legally» to the customer, you should consider security. A customer may ask you not to file a mechanic lien or to file a lawsuit. You can agree to do so in exchange for other reasonable security.
It`s worth doing, even if it means waiting longer for payment or granting additional loans. If you continue to legally push the customer, it will probably take months before you receive a verdict. Many other creditors «will rush you to the courthouse.» It is very interesting to offer the borrower incentives to provide security. Other creditors who receive judgment privileges over the months have a lower interest in the same property in which you now receive security. A security right can be further developed in many types of security by seizure. A pawnshop depends on this type of security. The debtor brings jewelry, stereo systems or other collateral to the pawnshop. The debtor then signs a security agreement, and the pawnshop retains the collateral. The pawnshop does not have to submit a UCC financing statement. This arrangement might work well for you on short-term loans. Simple seizure can enhance security rights in assets, shares, bonds and negotiable instruments.
In the case of a security right in inventory, the security right must be refined before the debtor is taken into possession, and the buyer must inform all previously secured parties of their intention to acquire a purchase-money security right in inventory before the debtor takes possession of it. If the assets you are selling are in your debtor`s inventory, you will need to search UCC filings to determine if another creditor has a competing security right in the debtor`s estate. In the submitted financing statements, you will learn the name and address of the previously secured party. You must send a notice to all previously secured parties describing the goods you wish to sell and indicating that you intend to retain a security right in them. Security rights in the amount of purchase money have special priority under the UCC. Think of the «floating privileges» or «general security interests» discussed above. These floating privileges may cover after the acquisition of the debtor`s assets. For example, if the debtor acquires new equipment, the floating privilege is attached to the equipment as soon as the debtor acquires ownership of it. It is not possible to «see and touch» a customer complaint. As a result, most lenders refine a security right in receivables by filing a financial statement. Large institutional lenders often require a «floating lien» on all of the debtor`s assets currently held and acquired after acquisition.
Each of your customers with a large bank line of credit has likely granted such a security on all inventory, equipment and receivables that are now in the debtor`s possession or will be in the future. Whenever you consider a security right in a credit transaction, you should inquire about other security rights that exist in the ownership.  Security granted by the debtor is usually included on credit reports such as those prepared by Dun and Bradstreet. You will likely want to order a search of the records to determine whether your debtor has granted a floating lien or a security right in a particular asset.  A security right in the furnishings could be invoked either at the central location or in the place (county) where the property is located.  In general, furniture is property (materials) that could be removed without damaging the property and represents a kind of hybrid between personal and real property. Examples would be lighting fixtures or HVAC devices. You should remember to check in the county land registries and in the state capital if there are any previous privileges in the schedules. If you sell goods on credit and lend your customer the money to buy, you are a «purchase money lender». If you retain a security right in the assets you sell to secure payment to the debtor, it is a «purchase-money security right». Except as otherwise provided in paragraphs (c) to (i), a security right against the Debtor and third parties in respect of the Security is enforceable only if: (1) paragraph (b) (3) of the Agreement is filled in respect of existing or subsequently acquired assets by the new Debtor, to the extent that ownership is described in the Agreement; and the priority of security rights in personal property is very similar to the priority of liens in real property. .