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Legal Research Library   >   Revised Article 9 of the UCC

Revised Article 9 of the UCC
Effective in New York on July 1, 2001
By Michael P. Miglino

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SEC. 9-109  |  sEC. 9-301  |  SEC. 9-301  |  SEC. 9-501
SEC. 9-501  |  SEC. 9-515  |  SEC. 9-705

On June 29, 2001, Governor Pataki signed into law Chapter 84 of the Laws of 2001, which amended a number of statutes, but most notably, revised Article 9 of the Uniform Commercial Code relating to secured transaction. The changes became effective in New York State on July 1, 2001.

This memo is intended as a general summary, from a title insurer�s perspective, of the most significant amendments to Article 9, namely, the applicability of the changes to various transactions, the law governing perfection and priority and the contents, duration and effectiveness of financing statements. Specific questions relating to financing statements require a more detailed review of the amendments.

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APPLICABILITY (SEC. 9-109)

Except as provided in UCC Section 9-109 ( c ) and ( d ), Revised Article 9 is applicable to a number of transactions, including but not limited to

1. a transaction that creates a security interest in personal property or fixtures
2. a sale of accounts, chattel paper, payment intangibles or promissory notes and
3. a security interest in a cooperative interest.

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PERFECTION AND PRIORITY (SEC. 9-301)

Revised Section 9-301 provides that, generally, the perfection of a security interest in collateral is governed by the local law of the jurisdiction where the debtor is located. Where collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection. Where collateral is a cooperative interest, the law of the State of New York governs perfection. No signatures are required in connection with the filing of a financing statement. The rationale for this surprising change appears to be Section 9-509 of Revised Article 9 which indicates that a person is entitled to file a financing statement if the debtor authorizes the filing

1. in an authenticated (i.e., signed or encrypted) record or
2. by becoming bound as debtor in a security agreement that describes the collateral.

Accordingly, the execution of a mortgage, which is defined in the Revised Article as a consensual interest in real property, including fixtures, or the execution of a security agreement by a proprietary lessee giving a lender a security interest in his or her cooperative unit would apparently authorize a person to file a financing statement against the debtor in those cases.

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STATUTORY DEFINITION OF LOCATION (SEC. 9-301)

Article 9 establishes the following rules regarding the údebtor�s locationî:

1. A debtor who is an individual is located at the individual’s
   principal residence;
2. A debtor that is an organization and has only one place of business is located at the place of business;
3. A debtor that is an organization that has more than one place of business is located at its chief executive office.

A úregistered organizationî is defined in Article 9 as an organization organized under the laws of a single state and, as to which, the state must maintain a public record showing the organization to have been formed.

A úregistered organizationî for purposes of Article 9 is located in the state of organization.

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FILING REAL PROPERTY RELATED FINANCING STATEMENT (SEC. 9-501)

1. Where the financing statement to be filed is a fixture filing (i.e., one which affects collateral which is or is to become a fixture) the place in which such financing interest should be filed is the office of the County Clerk (or, in Kings, Queens, New York, and the Bronx Counties, the office of the City Register) in which the real property affected by the filing is located.
2. Where the financing statement to be filed affects a cooperative interest, the place in which such financing statement should be filed is the office of the County Clerk (or, in the case of New York, Kings, Queens and Bronx Counties, the office of the City Register) in which the cooperative interest is located.
3. Where the financing statement to be filed is not a fixture filing, the place in which such financing statement should be filed is the Office of the Secretary of State in Albany. Accordingly, in order to perfect a non-fixture filing security interest against a corporation, limited partnership, or limited liability company incorporated or created under the laws of the State of New York, a financing statement would have to be filed in with the Secretary of State�s Office in Albany. A non-fixture filing security interest against an individual residing in Suffolk County, New York, would be filed in the Suffolk County Clerk�s Office. A real property related fixture filing or a security interest in a cooperative interest would be filed in the County Clerk�s Office (or in the Counties of Kings, Queens, Bronx and New York, in the City Register�s Office) where the real property or cooperative interest is located.
4. Where the financing statement appears to be both a fixture and non- fixture filing, it may be appropriate to file both in the county where the real property is located and where the debtor is located.

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SUFFICIENCY OF FILING (SEC. 9-501)

Section 9-501 (a) provides that a financing statement is sufficient only if it contains

1. the name of the debtor;
2. the name of the secured party or his/her/its representative;
3. indicates that the collateral secured by the financing statement,
   and
4. in the case of a cooperative interest, indicates the number and
   the street address of the cooperative unit.

Section 9-501 (b) provides that, in addition to the requirements of Section 9-510 (a), a real property related financing statement (i.e., a financing statement which is to be filed as a fixture filing or which covers a cooperative interest) must

• indicate that it covers that type of collateral;
• indicate that it is to be filed in the real property records
• provide a description of the real property to which the collateral is related, including the location of the real estate by reference to a book and page number in a deed or mortgage index maintained in a recording office, except in the City of New York, or counties of Nassau or Onondaga, where the statement must also give a block and lot number for the subject real estate;
• if the debtor does not have an interest of record in the real property, provide the name of the record owner.

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DURATION AND EFFECTIVENESS OF FINANCING STATEMENTS

Pursuant to Section 9-515 of Revised Article 9, a financing statement is effective for a period of 5 years after the date of filing, except in the case of

1. a public financed or manufactured home transaction, in which case it is effective for 30 years after filing,
2. the filing of a continuation statement which extends the effectiveness of the original financing statement for an additional 5 years,
3. a financing statement filed against a transmitting utility, in which case it is effective until terminated,
4. a mortgage that is effective as a financing statement, in which case it is effective until the mortgage is released or satisfied, or
5. a cooperative interest transaction, in which case it is effective for a period of 50 years after the filing.

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TRANSITION RULES - UCC�S FILED BEFORE EFFECTIVE DATE (SEC. 9-705)

A filed security interest that was enforceable immediately before the effective date of Revised Article 9 will continue to be effective provided that it also meets the requirements for perfection under Revised Article 9 (Sec. 9-705 (b).

Upon the timely filing of a continuation statement after the effective date of Revised Article 9, the effectiveness of a financing statement (filed prior to the date Revised Article 9 became effective) continues for the period provided by the law of the jurisdiction where the statement was filed (Sec. 9-705 (d)).

If a security interest filed prior to the effective date of Revised Article 9 was enforceable under the law governing perfection at the time of filing, but does not meet the perfection requirements under Revised Article 9, it will continue to be enforceable, but only until the earlier of

1. the time that the financing statement would have ceased to be enforceable under the law of the jurisdiction where it was filed or
2. June 30, 2006 (Sec. 9-705 ©).

With respect to cooperative interests, if immediately before Revised Article 9 takes effect, a security interest in a cooperative interest is enforceable, but such interest does not meet the requirements of Revised Article 9, such interest is will be deemed to be a perfected security interest

• for 5 years after Revised Article 9 takes effect and
• will remain perfected only if the perfection requirements under Revised Article 9 are met before the 5 years expires.

As mentioned at the outset, the information contained in this memo is intended as a very brief summary of some of the highlights of the amendments to Article 9. It is not a detailed review of all the changes to Article 9.

Should you have any question regarding this matter, please contact Company Counsel.

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