Perfection Flashcards
When is an SI perfected?
attachment + perfection = when an SI is perfected
What are the ways of perfection?
- Filing a finance statement
- Possession by SP
- Control by SP
- Automatic
Rules for perfection by filing a finance statement
Filed in correct place + financing statement meets the requirements
Correct place:
A. Fixture- at the county clerk’s office in the county where the land to which the fixture is attached is located
B. All other collateral- at the secretary of state’s office in the jurisdiction where Debtor is located
[Debtor is an individual= located at the person’s principal residence. Debtor is a non-registered organization (e.g., partnership)= located at its
place or business (If multiple, then chief executive office). Debtor is a registered organization (e.g., corporation)= state of
organization]
Financing statement:
Must include the following:
1. names of Debtor and SP
2. sufficient description of the collateral (reasonably identifies the collateral- can be by UCC type or generic)
3. authorized by the debtor (is done by a security agreement)
What must a financing statement for a fixture filing also include?
(1) indicate that it covers a fixture;
(2) indicate that it will be filed in the real property records;
(3) describe the real property to which the fixture is related; and
(4) provide the name of the owner of the real property, if different from Debtor
Ways a filling statement can be ineffective
(1) filed in wrong place
(2) does not include required information
(3) not authorized by the debtor
Minor error rule for financing statements
FS with minor errors is effective unless the errors make it seriously misleading
Failure to sufficiently provide Debtor’s name is seriously misleading, unless: A search of the records using the financing office’s standard search logic under debtors correct name would disclose the FS
What are the changes that can affect the effectiveness of the filing statement
Original collateral is sold for proceeds - (see next flash card for rule)
Debtor changes name - only effective for 4 months; an amendment must be filed within that time
Debtor moves to a different state- must file new FS in new state within 4 months of move
Rules for when Proceeds from original collateral change the effectiveness of the financing statement
Unless SA says otherwise it is Perfected automatically for 20 days and the 20 days continues past that only if (1) the proceeds are collateral which can be perfected by filing in the same office and the proceeds were not acquired with cash proceeds (2) the proceeds identifiable cash, or (3) the SI in proceeds is otherwise perfected when the SI attaches to the
proceeds or within 20 days thereafter (amended)
Perfection by possession
SI is perfected if the SP, or a third-party authorized by SP, takes possession of the
collateral
**Applies only if the collateral is: (1) tangible negotiable documents, (2) goods, (3) instruments, (4) money, or (5) tangible chattel paper
Perfection by control
SI is perfected if the SP takes control of the collateral
**Applies only if the collateral is: (1) an investment security, (2) rights to a letter of credit, (3) a deposit account, or (4) an electronic chattel paper
Automatic Perfection
A PMSI in consumer goods perfects upon attachment and remains effective
permanently
EXCEPTIONS- motor vehicles and fixtures (must file to perfect)
How long is a filed financing statement effective?
5 years from when filed
How does one extend a filing statement?
A continuation statement must be filed within six months before the five-year period expires
This extends the original FS for another five-year term from the date the FS would have become ineffective
When does a filing statement lapse?
FS will lapse if it expires without a continuation statement being filed
Upon lapse, the FS becomes ineffective and the SI perfected by the FS
becomes unperfected
**(can still be perfected if SP is in possession of the collateral then perfection will continue, no lapse)
