Multifamily loan and security agreement - UCC-1 collateral description complications

Multifamily collateral descriptions are tricky because you're dealing with both real estate fixtures and personal property. The rental income piece usually gets covered under 'accounts' or 'accounts receivable' in the UCC-1. For the personal property stuff like appliances and HVAC, you definitely want to be specific because generic language like 'all fixtures' can get challenged.

I've been through this exact scenario with a 36-unit property last year. The key is getting the collateral schedule right in your security agreement first, then making sure the UCC-1 matches exactly. Don't try to expand the collateral description in the UCC-1 beyond what's in your underlying security docs.

Had a similar nightmare with a multifamily refi. Ended up using Certana.ai to cross-check our security agreement against the proposed UCC-1 language. You just upload both documents and it flags any inconsistencies between them. Saved us from filing a UCC-1 that wouldn't have matched our security docs, which would have been a disaster with the lender.

Your attorney charging $400/hour to review UCC language is nuts. Most of this stuff is pretty standard once you know the patterns. For multifamily properties, I typically see: 'all rental and lease agreements, all accounts receivable arising from rental of units, all appliances and personal property located at [address], all HVAC equipment, all laundry equipment and revenue therefrom.' Something like that.

Wait, I'm confused about the continuation vs amendment issue. If your UCC-1 expires in 3 months, can you file a continuation with the new collateral description or do you need to file an amendment first?

The real issue here is that multifamily properties blur the line between real estate and personal property. Rental income is definitely personal property (accounts), but things like built-in appliances might be fixtures that are part of the real estate. Your lender wants a UCC-1 because they can't get a real estate mortgage on personal property, but they also want to make sure they're not missing anything that should be covered by the mortgage instead.

I work with multifamily lenders all the time and they're definitely getting more picky about collateral descriptions lately. Part of it is regulatory pressure, part of it is they've seen too many deals where the security interest wasn't properly perfected because the UCC-1 didn't match the security agreement.

Just went through this with a 52-unit property. Ended up with a 3-page collateral schedule in the security agreement and a much simpler summary in the UCC-1 that referenced the security agreement. Seemed to work fine.

Another thing to watch out for with multifamily properties is making sure your debtor name matches exactly across all the documents. If you have an LLC as the borrower, make sure the UCC-1 has the exact same entity name as the security agreement and the loan docs.

Have you considered whether you need a fixture filing for any of this? If some of the collateral is attached to the real estate, you might need to file the UCC-1 as a fixture filing with the real estate records instead of just the regular UCC filing office.

UPDATE: Ended up using a document review service to make sure everything aligned properly before filing. Found several inconsistencies between our security agreement and proposed UCC-1 that could have caused problems. Filed the UCC-3 amendment and continuation together and the lender accepted it. Thanks everyone for the advice!

This is a great example of why proper document coordination is so critical in multifamily financing. I've seen deals fall apart at the last minute because of UCC filing issues. One thing I'd add for anyone reading this - when you're dealing with a property that has both residential and commercial components (like ground floor retail in a multifamily building), make sure your collateral description addresses both income streams separately. The rental income from residential units might be treated differently than commercial lease payments for UCC purposes. Also, if you have any equipment leases (like the laundry machines), those lease agreements themselves can be collateral separate from the equipment and revenue. Worth double-checking that your security agreement covers all the different types of personal property and income streams you actually have.