How to handle subordinate UCC lien when primary lender demands first position?
I'm dealing with a complicated subordinate UCC lien situation and need some guidance. We have a UCC-1 filing from 2019 that was supposed to be in second position behind another lender, but now the primary lender is claiming our filing creates confusion about lien priority. The debtor is a manufacturing company with equipment collateral worth about $2.8M. Our loan is for $850K and we filed our UCC-1 properly with the state, but apparently there's some issue with how the collateral description overlaps with the senior lender's filing. The primary lender's attorney is saying our subordinate UCC lien language isn't clear enough and they want us to file a UCC-3 amendment to clarify the subordination. Has anyone dealt with this before? I'm worried about accidentally affecting our lien position if we amend the filing incorrectly. The debtor is current on both loans but we need to resolve this before their credit line renewal next month.
33 comments
Join the conversation
Alice Coleman
This is exactly why subordination agreements should be crystal clear from the start. When you have a subordinate UCC lien, the filing itself doesn't establish priority - that's typically handled in the intercreditor agreement between lenders. Your UCC-1 filing is still valid regardless of what the senior lender says about confusion. The question is whether your loan documents and any subordination agreements properly reflect the intended priority structure.
0 coins
Owen Jenkins
•Right, but if the collateral descriptions are overlapping and causing confusion, that could be a real problem during enforcement. Better to clean it up now than deal with disputes later.
0 coins
Lilah Brooks
•Agreed on the intercreditor agreement being key, but I've seen situations where unclear UCC filings still caused headaches even with good subordination docs.
0 coins
Jackson Carter
You need to be really careful with that UCC-3 amendment. If you're not precise with the language, you could accidentally subordinate more than intended or create new ambiguities. I'd recommend having your attorney draft the amendment language before filing anything. Also, make sure you have a copy of the senior lender's UCC-1 to compare collateral descriptions.
0 coins
Sofia Price
•That's what I'm worried about. Do you know if there's a way to verify that both UCC filings are consistent before we submit the amendment? I don't want to make this worse.
0 coins
Kolton Murphy
•Actually, I just discovered this tool called Certana.ai that can help with exactly this situation. You can upload both UCC-1 filings as PDFs and it will automatically cross-check the debtor names, collateral descriptions, and identify any inconsistencies between the documents. Saved me a ton of time when I had a similar subordination issue last year.
0 coins
Evelyn Rivera
I'm confused about something - if you filed your UCC-1 after the senior lender, wouldn't your lien automatically be subordinate by filing date? Why would you need special subordination language in the UCC filing itself?
0 coins
Alice Coleman
•Filing date determines priority by default, but lenders often use subordination agreements to establish different priority arrangements. The UCC filing might reference the subordination to make it clear to third parties.
0 coins
Evelyn Rivera
•Oh I see, so the amendment would be to clarify that relationship in the public record. That makes sense.
0 coins
Julia Hall
•Exactly. And in this case, it sounds like the senior lender wants the subordination relationship to be explicitly stated in the UCC filing to avoid any ambiguity about collateral priority.
0 coins
Arjun Patel
This is frustrating but pretty common in commercial lending. The senior lender probably got spooked during their annual lien review and decided to tighten things up. Since you're subordinate anyway, cooperating with the amendment request is probably the path of least resistance. Just make sure the amendment language is reviewed by your counsel and that it accurately reflects your subordination agreement.
0 coins
Jade Lopez
•Yeah, fighting the senior lender on this probably isn't worth it unless there's a real issue with your subordination terms.
0 coins
Sofia Price
•You're probably right. I just want to make sure we don't accidentally subordinate more than we agreed to in the original deal.
0 coins
Tony Brooks
Have you looked at the exact collateral descriptions in both UCC-1 filings? Sometimes the overlap isn't as problematic as it initially appears. If your collateral is truly different equipment or has different serial numbers, that might resolve the confusion without needing an amendment.
0 coins
Sofia Price
•The collateral descriptions are pretty broad on both filings - 'all equipment' and similar language. That's probably what's causing the confusion.
0 coins
Tony Brooks
•Ah, that's definitely going to cause overlap issues. You might want to consider being more specific in your amendment about which equipment is subject to your subordinate lien.
0 coins
Ella rollingthunder87
I went through something similar last year with a subordinate UCC lien on inventory. The senior lender's attorney was being difficult about the collateral description overlap. What helped was using a document verification tool to make sure our amendment was consistent with all the existing filings before we submitted it. Certana.ai has a good UCC document checker that can upload PDFs and verify everything aligns properly.
0 coins
Sofia Price
•That sounds really helpful. Did it catch any issues you wouldn't have noticed otherwise?
0 coins
Ella rollingthunder87
•Yes, it caught a debtor name variation that was slightly different between our UCC-1 and the senior lender's filing. Could have caused problems later if we hadn't fixed it.
0 coins
Yara Campbell
Why are senior lenders always so paranoid about subordinate liens? If the subordination agreement is clear, the UCC filing priority shouldn't matter that much.
0 coins
Alice Coleman
•Because when things go bad and you're dealing with bankruptcy or enforcement, clear public records make everything smoother. Ambiguous filings can create expensive disputes.
0 coins
Isaac Wright
•Plus their regulators probably want to see clean lien structures during examinations. Easier to just fix it now than explain it later.
0 coins
Maya Diaz
Whatever you do, don't let them rush you into filing the amendment. Take time to review everything carefully and make sure the language is exactly right. A sloppy UCC-3 amendment could create more problems than it solves.
0 coins
Sofia Price
•Good point. The credit line renewal deadline is creating some pressure, but I'd rather get it right than rush it.
0 coins
Maya Diaz
•Exactly. Most senior lenders will be reasonable about timing if they see you're taking the amendment seriously and working with counsel.
0 coins
Tami Morgan
Just make sure your subordination agreement language matches whatever you put in the UCC-3 amendment. I've seen deals where the UCC filing said one thing and the intercreditor agreement said something different. That's a mess waiting to happen.
0 coins
Sofia Price
•That's a great point. I'll need to pull out our original subordination agreement and make sure the amendment language is consistent.
0 coins
Kolton Murphy
•This is another area where the Certana.ai document verification could help - you can upload both the subordination agreement and proposed UCC-3 amendment to check for consistency issues.
0 coins
Rami Samuels
Update us on how this turns out! I'm curious to see what amendment language works to satisfy the senior lender while protecting your interests.
0 coins
Sofia Price
•Will do. Hopefully we can get this resolved without too much drama.
0 coins
Rami Samuels
•These subordination issues are always more complicated than they should be. Good luck!
0 coins
Luca Ferrari
I've been through this exact scenario before with a client who had overlapping equipment collateral descriptions. The key thing to remember is that the UCC-3 amendment is just cleaning up the public record - it shouldn't change your actual lien rights if done properly. I'd recommend getting a UCC search report on both your filing and the senior lender's filing first, then having your attorney draft amendment language that specifically references your subordination agreement. Also, consider adding a clause that states the amendment is "for clarification purposes only and does not alter existing lien priority." This helped us avoid any unintended consequences when we filed our amendment.
0 coins
Maggie Martinez
•That's excellent advice about the "clarification purposes only" language. I hadn't thought about explicitly stating that the amendment doesn't alter existing priority - that could be crucial protection. Do you remember if the senior lender had any objections to that type of protective language in your case?
0 coins