What is a UCC-1 agreement?
UCC-1 stands for Uniform Commercial Code Form 1. It is not an agreement. It is just notice to the world that one person claims that it has an interest in someone else's property, usually as collateral for a debt. It is normally filed in the office of the Secretary of State in the state where the debtor/borrower is located. In most cases, located means the state of incorporation for corporations, the state of creation for limited liability companies and other entities, and the state of residence for individuals.
There must be another agreement, called a security agreement, that actually grants the security interest and defines the terms of the deal. The security agreement and the UCC-1 combined are like a mortgage on real estate. The mortgage is both the notice and the agreement for real estate, while for personal property the notice and the agreement are separate.
The UCC-1 is a notice to the public not an agreement. The UCC-1 may be used to notice a lien created by a security agreement of a loan for a home, car, and etc. but is not an agreement. The UCC-1 being a "financing statement" is not an "agreement". Looking up the definitions of these two will clarify this matter.
The importance of the UCC-1 to the secured party and other lenders/creditors is the first in time, first in line priority. A UCC-1 notifies others of outstanding debt such as security agreement, summary judgment lien, commercial or maritime lien and so forth. Collateral items may be listed directly. Property, real and personal property, can be involved. All of this is for the protection of the secured party and allow other possible lenders/creditors to be aware of outstanding unpaid debt that would stand inline for collection of any new debt.
The common belief, "It applies to personal property, not real estate.", is wrong. One needs look no further that the form itself to see "Real Estate" mentioned three times in the form and four times in the instructions.
Misinformation exists with the wording, "There must be another agreement, called a security agreement. ". This implies two agreements even though the writer previously stated the UCC-1 is not an agreement. The other implication is that the UCC-1 is used only as it applies to the "security agreement". There need not be a previous defaulted note on personal property to utilize the UCC-1 notice as it may be used for other previously mentioned purposes.
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