I purchase a house at auction that has a UCC Financing Statement filed for the borrower and the property.? Is this a lien? It is dated after the 1st TD that was sold at auction. I have read that a UCC lien for fixtures attached to the house are not wiped out by the foreclosure. Will it be necessary to get this released? I have also read that one of the remedies is for the lender to have the subject equipment removed. I have not seen the equipment, but the filing says it is a water treatment system. As far as I am concerned, they can come and get it anytime. I would appreciate any insights on how to deal with this issue. ?
I’m not sure, but I vaguely remember letting a water softener co come in and remove their treatment system rather than deal with the UCC, so its possible they remain intact after foreclsoure - but I’m not sure. Please post the answer back here if you find it.
The item in question is a water treatment system. I contacted the lender and invited them to remove it. But they are not interested. Clearly not liable for the debt, but I am wondering if it will be an title insurance issue when the house is sold or refinanced.
I have asked the title company to do a prelim, but I think I need a new title company as they are not responsive. I found the following in a title insurance guide online.?
The Uniform Commercial Code (UCC) is a body of law which attempts to codify and make uniform throughout the country all law relating to commercial transactions, such as conditional sales, contracts, pledges, and chattel mortgages. The UCC covers personal property transactions, including stocks and commercial paper. The main relevance of the UCC to real property is in the area of fixtures, as covered in Article 9 of the Code. Where a chattel is purchased on credit or is pledged as security, a security interest is created in the chattel by the execution of a security agreement. Rather than recording the agreement, the creditor would file a financing statement in the recorder’s office. If the financing statement has been properly filed, the creditor, upon default, could repossess the chattel and remove it from the property. Each state must legislatively adopt the U.C.C. and typically state legislatures make minor modifications in the U.C.C. before adopting.
A “fixture” is an article that was once personal property, but that has been installed in or attached to land or a building in some more or less permanent manner, so that such article is regarded in law as part of the real estate.
Nowhere in the Uniform Commercial Code is the term “fixture” explicitly defined. However, the code does provide that “goods are fixtures when they become so related to the particular real estate that in interest in them arises under real estate law.”
This provision basically leaves the question of whether an item is a fixture or not to the law of each state.
In determining whether or not an article is a fixture, the courts apply the following tests:
The manner in which the article is attached to the real estate.
The character of the article and its adaption to the real estate.
The intention of the parties.
The title professional should be aware that some parties to transactions and draftsmen use the term to refer to items that would not be considered part of the real estate. For example, shelving units for a grocery store.
?Priority Of U.C.C.
Generally a properly perfected security in fixtures will have priority over an earlier mortgage. Do not waive a financing statement because of a nonjudicial foreclosure of a prior mortgage. If there has been a judicial foreclosure, do not waive a financing statement unless notice was given to the creditor.
Good find. Seems to answer it, but I wish it cited the code.
Finally got a prelim today. And to my delight, the prelim did mention the UCC filing at all. So, they must get wiped out at foreclosure or they have no standing beyond protecting the equipment secured by the UCC filing. Will see how it proceeds through escrow.