Participation in U.S. assets is relatively streamlined and, in most cases, governed by Article 9 of the Single Code of Commerce (UCC). As a general rule, a securities link is attached if the guarantee is the property of the insured party pursuant to the agreement, or if the borrower has signed a guarantee agreement describing the guarantee, the declared value and the debtor entitled to the guarantee. If all three conditions are met, the safety interest is “attached” and enforceable. Especially in the United States, a single security agreement can effectively create a security interest for most of a borrower`s assets. However, if this security interest is not “sophisticated,” it cannot meet other security interests taken into account in the same safeguards and perfection may vary depending on the assets that carry the security. Under the UCC, a lender can enhance its security interest by meeting the requirements of perfection set out in the UCC and by perfecting once the security interest takes precedence over all other security interests that are not perfected or have been subsequently refined. Each state has adopted exemptions from the standard UCC, so that, although they are generally very similar, the UCC should be accepted by the state concerned if a security interest is to be taken. In certain circumstances, a lender providing equipment financing may not be able or willing to obtain or defer to the right to a security interest in the purchase money under paragraphs 9-324 of the Single Code of Commerce. Under these circumstances, the lender must search for UCC documents in search of previous statements that express an interest in the funded equipment.
The signed agreement must be recognized by a notary and recorded in the county`s official records in order to be enforceable. There are other issues of contractual interpretation. Do the pawn rights apply only to the right of the party in dispute in the equipment concerned? Or does it cover a right to perfection that arises from the applicable funding declaration, in which the opposite secure party is considered an insured party? If the release of the right of pawn concerned only the right of the opposite secure party in the applicable equipment and if the financing declaration is awarded by the insured party opposed to an agent who has or obtains a right of pawn in the applicable equipment in another way, could the agent`s right of guarantee, regardless of the release of the lender`s pledge? Finally, the agent is the insured party on a previous UCC funding statement for applicable equipment and the original opposite secure party has only released its right to pledge on the appropriate equipment. The answers to these questions may depend on the contractual interpretation of the right to pledge. The answer can also be drawn from a more complex analysis of various provisions of the UCC on the impact of divestitures and other issues. If the applicable device had only been explicitly removed by a UCC-3, none of these exercises would have been necessary. This edition of Dispatches from the Trenches discusses the approaches normally used by equipment lenders to address the conflicting claims revealed by these searches. Each approach involves the lender contacting the insured party claiming a competing interest in the equipment on the UCC financing statement and asking the litigant to take some form of action.