Even a minor error on a UCC financing statement can result in rejection. This can not only cost you time and money to correct, but it could negatively affect the priority of the lender’s interest in the collateral. However, not all mistakes are created equal. Some are more damaging than others, which is why we’ve put together the list of the top 11 mistakes we see on clients’ filings. Avoid the pitfalls below, and you’ll reduce the risk of your filing being rejected.1. Failure to list ONLY the legal name of the debtor in the debtor name box.
We still see many filings prepared with the legal name followed by “a Delaware Limited Liability Company” or d/b/a names. The only way to be sure you have the correct debtor name is to review the charter document and any amendments for registered entities and usually the unexpired state issued driver’s license for individual debtors. The name on the UCC should be styled to match the name on these sources.
In addition, we often see filings involving trusts prepared incorrectly with the trustee’s name in the debtor box. Filings involving trusts should either have the trust’s name in the debtor box or the settlor’s name if the trust does not have a name.2. Submitting UCC3s with multiple functions in states that don’t allow it.
Not all states allow multiple functions (i.e. continuation and name change) on a UCC3. Refer to our help piece, Central Filing Offices That Allow Multiple Functions Per UCC Under Article 9 to see which states allow what types of multiple functions.3. Incorrect UCC1 file number listed on UCC3.
Filers need to be extremely careful providing the UCC1 file number because the state will only reject if there is no such number in their system. If the number listed is an active filing in the filing office’s system, they will accept it and hook it up with the wrong (unrelated) UCC1 and the filer will never know. This is one of the reasons why a post filing search is highly recommended.4. Failure to include ALL of the debtor or secured party (SP) information on debtor or SP name or address changes.
Note that the vast majority of states treat debtor or secured party name or address changes as “new parties” for the purpose of indexing the filing in their records. Therefore, all of the debtor or SP information needs to be filled out or the filing will be rejected. For example, if you are filing a debtor address change, you also need to include the name of the debtor. Some filers enter only the information that is changing—probably because the UCC3 form directions seem to indicate that.
Note that Delaware is one of the rare exceptions to this and will accept debtor or SP changes with just the changed/new info included in box 7.5. Filling out the UCC3 as a secured party name change when it should be an assignment.
We have no way of knowing whether a name change really should be an assignment when we review clients’ filings, however, sometimes our staff asks the client about it if the new name on a SP name change appears to be totally unrelated to the original secured party name. When we’ve done this, we’ve often found that the filing should have been prepared as an assignment.6. Failure to include the debtor name on UCC3s in states that require it.
There are a number of states that require the debtor’s name on a UCC3 regardless of the type of amendment. We recommend that you put the debtor’s name in Box 10 (Optional Filer Reference Data) except in GA and RI, which prefer that the name be listed in Box 6.
Note that Florida and Montana also require the secured party’s name on UCC3 filings. Refer to our help piece on “Non-Uniform UCC3 Requirements Under Article 9” for these and other state specific UCC3 requirements.7. Failure to include the legal description of the real property on UCC3 fixture filings.
Article 9 requires the legal description of the real property on any type of UCC3 for fixture filings per 9-512(2). In addition, remember to check field 1b on UCC3 amendments, which indicates that the financing statement amendment is to be filed [for record] (or recorded) in the real estate records.8. Failure to include tax information in states that require it.
Florida has a documentary stamp tax and Tennessee has a recordation tax. Alabama and Maryland have taxes associated with local fixture filings.9. Incorrectly filing UCC3 debtor name change when the debtor merges into another entity.
In most cases, a new UCC1 should be filed in the new debtor’s state of organization. (See article by attorney Robert Ihne, updated in 2013, originally published in the May/June 2004 issue of The Secured Lender -- “How to Maintain Perfection and Priority When Changes Occur After Closing”.)10. Multiple secured parties on UCC1 require all parties to act when filing UCC3s.
Filing a UCC3 amendment referencing only one authorizing secured party when multiple secured parties were indicated on the UCC1 only affects the one secured party’s interest. As an example, if all secured parties intend to continue a UCC1, all of them must be listed as authorizing the continuation or each party must file a separate UCC3 continuation in order to continue their security interest.11. UCC filers often attempt to file UCC3 continuations outside the permitted continuation window.
UCC3 continuations may only be filed six months prior to the lapse date. Attempting to file a continuation statement earlier than or after the six-month window will result in rejection.
Given the complexity and importance of properly preparing UCC filings, you may want to consider using an experienced service company to file your financing statements for you. Doing so can help you avoid unnecessary rejections.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.