In the last
column we reviewed the difference between a security agreement and the UCC-1 financing
In this column we will discuss when it is necessary to record the
financing statement and the reason that the financing statement should always be recorded.
The recording of the financing statement is required when the security
involves inventory, equipment, accounts, general intangibles and farm products.
The recording does not have to be immediate. In the majority of states
the financing statement may be recorded any time within five years of the date of the
When the security is consumer goods recording of the financing statement
is not required. For instance you purchase furniture from Levitz and finance it. Levitz
has a security interest in the furniture however they are not required to record the
Several states require that the financing statement be recorded in
multiple locations in order to be perfected.
For instance Arkansas requires that if the debtor only has one location
that the financing statement be recorded with the Secretary of States office in Little
Rock and also with the County Recorder's office in the county where the debtor has his
place of business.
Several states require that filings be recorded in different locations
depending on the type of collateral. For instance consumer goods and farm products are
generally required to be filed in the county where they are located whereas equipment and
inventory is usually recorded at the Secretary of States office. You should always contact
the Secretary of State to determine where your filing is to be recorded.
It is recommended that financing statements always be recorded
regardless of whether they are required to be or not. Recording makes the document a
public record and informs other creditors that you have specific collateral as security
for your debt.
In addition to security agreements; leases, rental agreements and
consignments should also be recorded as public notice to other creditors. By doing so you
are protected from other creditors removing property held by you as collateral for
satisfaction of their debt. This includes the IRS and state taxing authority. Should
another creditor remove property that you are first filed in without your permission you
may have recourse against the creditor for the value of the property obtained.
For a free listing of Secretary of States addresses and
phone numbers send your E-mail to Davea
with the reference SOS.
In the next column we will discuss the difference between a security
agreement and a purchase money security agreement.
I wish you well.