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#2002930 - 03/20/15 03:35 PM UCC searches on sellers
LEnright Offline
Junior Member
Joined: Jun 2010
Posts: 29
If our customer is purchasing equipment and we are financing that purchase, should we search for UCC filings on the seller? It is sometimes hard to know exactly what name a UCC on the seller would be filed in. If we file a purchase money security interest in the equipment in our correct legal borrower's name, could we still be facing a UCC lien ahead of us because of a potential filing we are unaware of regarding the previous owner?

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#2024776 - 07/02/15 05:17 PM Re: UCC searches on sellers LEnright
Smiles Offline
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Joined: Jan 2007
Posts: 19
I don't think it would be necessary. Your buyer should be protected as a Purchaser in Good Faith.

The previous lienholders rights typically detach when the product is sold in a retail setting. (why floor plan lending is riskier business) The proceeds of the sale become the prior lienholders collateral.

Do some research on Purchases in Good Faith and that should help you understand the process.

Also UCC liens put other lenders on notice that you have a lien on a particular debtor's assets, not necessarily a particular piece of collateral so as long as you are filed in the proper name of your debtor on the asset you financed you should be ok.

Someone else filed on that asset in another name would not have a UCC lien priority on your borrowers asset.

Just my interpretation, and how we have applied this in practice.

Last edited by Smiles; 07/02/15 05:26 PM. Reason: added comment
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#2034288 - 08/18/15 05:23 PM Re: UCC searches on sellers LEnright
reed3065 Offline
New Poster
Joined: May 2006
Posts: 16
My practice has been to always request a copy of the bill of sale from the seller and check for any UCCs of record. If any UCCs are of record, the check is made to 2 parties. The only exception would be if the seller was in the business of selling the merchandise in the ordinary course of business. I have had to sue a "good faith purchaser" of equipment that did not check for our UCC and was successful in recovery.

Check with your counsel in any event.

REE

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