June 21, 2011
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Question:
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Hi Ken
I bought your whole pack of contracts and now I am ready to use the UCC-1 form against one of the dead beats. Customer basically defaulted on every single payment and disputed and reversed all 3 payments on her checking account.
So my question is this;
Value of the equipment software written is $2000
Entire monitoring was defaulted on 36 months, @39.99/mo however 3 payments were kicked back and she got probably 4 months worth of service.
What exactly do I put on the UCC-1 form? Do I write in dollar amount of 80% of monitoring as your contracts stated or 100%? What about value of software: 80% or 100%?
Do I write alarm system as collateral?
Also itÂ’s asking if Financing Statement is to be filed in Real Estate Records? My assumption is yes.
Also how long does the UCC-1 is valid for? I see there are extension forms also.
Does this UCC lien accrue any interest at all in NJ? ( I use all your
residential contracts)
I have now ability to do it electronically. I am and this is in NJ.
https://www.njportal.com/UCC/
Thanks
HSS
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Answer
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All of my Standard Alarm Contracts contain a UCC provision. Here is how that works.
The contract creates the right to a security interest in your subscriber's personal property. This collateral is described in the contract. For residential contracts it's the equipment you install. In commercial contracts it's in all subscriber personal property - so it's not limited to the equipment you installed. No dollar amount is specified; your security interest should cover the amount you are owed, though the collateral may not be worth that much, or may already be liened.
The UCC-1 is not the Security Agreement. It is the Financing Statement that gets filed to "perfect" your security interest. In essence it puts the world on notice of your lien, and it establishes your priority in the order filed. Your UCC-1 is behind already filed UCC-1s, unless your lien is for a purchase money lien - which means it covers only what you have sold, in which event you can claim priority.
You should describe your collateral in the UCC-1 form.
You do not put in any dollar amount on the UCC-1 form
The form gets filed with your state. The Department of State has set up a central location to file. Almost all states permit this electronically.
It's not the UCC-1 that accrues interest. The UCC-1 is only the filing form giving notice of the lien. If your underlying debt accrues interest, which it does in the contract, then interest is also covered by the lien.
I believe the UCC-1 is good for 5 years (I don't have statute in front of me and it may be 7 years). It can be renewed. The UCC-1 is not signed by the subscriber, so you file it because the contract which creates the security interest permits the filing.
Note of caution. Although its easy and inexpensive to file a UCC-1 (under $10) you should not routinely file this lien unless you believe your subscriber is going to or has defaulted. Filing the UCC-1 will affect your subscriber's credit, and may violate other agreements your subscriber has with lenders, mortgagors or landlords.
A few other tidbits about the UCC-1 and what it accomplishes. Once filed you are secured. If your subscriber files bankruptcy you can claim a security interest in the collateral. If a bankruptcy is filed within 90 days of the filing of the UCC-1 then it will be treated as a "preference" and can be set aside, making you unsecured.
As a secured creditor you can demand the collateral and you can sue to recover that collateral rather than a money judgment. Often the debtor would prefer to pay you rather than surrender the collateral.