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Just curious - what made you choose the installment sale structure over a straight security agreement? Tax benefits for the customer?
Makes sense for construction equipment. That stuff gets beat up and loses value fast.
Good point about the repo angle. Much cleaner with an installment sale than going through Article 9 foreclosure.
One more thing to consider - if this is PMSI collateral, make sure you file within 20 days of the debtor taking possession to maintain super-priority. The installment sale timing might affect your PMSI status.
Actually, for equipment PMSI it's 20 days from when debtor receives possession, not delivery. Make sure you're tracking the right date.
Exactly. Delivery and possession can be different dates depending on setup and training requirements.
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In my experience, if you're 18 months into accepting modified performance without objection, you're probably looking at an uphill battle to enforce original terms. The practical advice is to document everything going forward, send written notices for any future deviations, and maybe consider whether the current arrangement actually works better for your business anyway. Sometimes what starts as a course of performance issue ends up being a better deal for everyone.
That's often the best outcome. Get it in writing, document the modification properly, and move forward with clear terms everyone understands. Lessons learned for next time.
Smart approach. Fighting a 1-303(d) course of performance claim when you've been accepting modified terms for that long is expensive and risky. Better to cut your losses and improve your procedures.
This thread has been really helpful. I'm dealing with a similar situation where we've been accepting partial payments for about 8 months. Sounds like I need to send some kind of written notice to preserve our rights under the original agreement. Anyone have suggestions for language to use?
I use language like 'acceptance of this payment is without waiver of any rights under the original agreement and does not constitute acceptance of modified terms.' Keep it simple but clear.
Perfect, that's exactly what I was looking for. Going to start including that in all our payment processing going forward.
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Just went through something similar with Michigan's UCC system last week. These database sync issues seem to be happening across multiple states. I ended up having to download every single document manually and cross-reference them outside the portal. Pain in the neck but it's the only way to be sure.
Michigan's system is terrible too. Seems like a widespread problem with state databases.
At least Michigan lets you download documents easily. Some states make even that difficult.
UPDATE: Finally got this resolved. Called the SD Secretary of State office and they confirmed there's a known issue with their database indexing that they're working to fix. They manually ran the search for me and provided certified copies of the correct filings. Turns out there were only two active UCC-1s, not three like the portal was showing. Also used that Certana tool someone mentioned earlier to double-check all the document consistency - really helpful for catching details I might have missed.
Nice work getting the official confirmation. How did the Certana verification work out for you?
The Certana check was really useful - it immediately flagged that one of the documents had an inconsistent debtor name format that could have caused problems later. Easy upload process and instant results.
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Whatever training you choose, make sure it covers continuation filing deadlines. We almost lost a client's security interest because nobody understood the 6-month window requirement for continuation statements.
You can file a continuation anytime within 6 months before the original UCC-1 expires. File too early and it's ineffective, file too late and you lose your priority. It's one of those things that seems simple but the timing is critical.
And don't forget that continuations extend the filing for another 5 years from the original expiration date, not from when you file the continuation. Common mistake.
Bottom line - invest in proper training now rather than dealing with malpractice issues later. UCC mistakes can void security interests and that's not a conversation you want to have with a client who just lost their collateral priority.
Plus your malpractice carrier will love seeing that you've invested in staff training. Shows you're taking risk management seriously.
Good point about the malpractice angle. That's another argument for formal training versus just learning on the job.
Serene Snow
Honestly this thread is making me realize I should probably have a lawyer review my security agreement. There are so many details that could cause problems later. Better safe than sorry on a $180K transaction.
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Teresa Boyd
•That's probably smart for a transaction this size. A lawyer can spot issues you might miss and help negotiate better terms.
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Serene Snow
•Yeah, false economy to skip legal review on something this important to my business.
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Issac Nightingale
Thanks everyone for all the detailed responses! This gives me a much better understanding of what to look for in the security agreement. I feel more confident about reviewing the documents now and know what questions to ask the lender. Really appreciate this community.
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Teresa Boyd
•Glad we could help! Feel free to post any other questions that come up during your review.
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Aileen Rodriguez
•Good luck with your equipment purchase! Just remember - get that debtor name exactly right on all documents.
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