UCC 9-204 comment 5 interpretation for after-acquired property clauses
Running into some confusion with UCC 9-204 comment 5 and how it applies to our after-acquired property language in commercial lending. We've been using standard boilerplate that covers "all equipment now owned or hereafter acquired" but our compliance team is questioning whether comment 5 creates any limitations we need to worry about. The comment mentions something about automatic perfection not extending to after-acquired property in certain situations, but I'm not clear on when this becomes an issue. We primarily deal with equipment financing and inventory loans, and I want to make sure our UCC-1 filings are solid. Has anyone dealt with specific situations where comment 5 created problems with their after-acquired property coverage? I know the statute itself in 9-204(a) allows after-acquired property clauses, but these comments sometimes create practical issues that aren't immediately obvious.
34 comments
Join the conversation
Abigail Spencer
The key thing with comment 5 is that it's specifically addressing automatic perfection scenarios, not filed financing statements. If you're filing UCC-1s for equipment and inventory, you're not relying on automatic perfection anyway. The comment is mainly relevant for purchase money security interests that qualify for temporary automatic perfection under 9-312(f) - that's where the after-acquired property limitation kicks in.
0 coins
Anita George
•That makes sense. So for our regular filed UCC-1s covering equipment, the comment 5 restriction wouldn't apply since we're not using automatic perfection?
0 coins
Abigail Spencer
•Exactly. Comment 5 is about preventing automatic perfection from extending indefinitely to future acquisitions. Your filed financing statements under 9-310 don't have that issue.
0 coins
Logan Chiang
I've seen this come up in PMSI situations where lenders thought they had automatic perfection covering after-acquired inventory, but comment 5 specifically says that automatic perfection for PMSIs generally doesn't extend to after-acquired collateral. You still need to file if you want that coverage to continue.
0 coins
Isla Fischer
•Wait, so if we have a PMSI in equipment and file within 20 days, does that filing cover after-acquired equipment or not?
0 coins
Logan Chiang
•The filing covers whatever your security agreement says it covers. Comment 5 just means you can't rely on automatic perfection alone for after-acquired property - but once you file, you're perfected by filing, not by automatic perfection.
0 coins
Abigail Spencer
•Right, and the 20-day grace period for PMSI equipment is retroactive to the debtor taking possession, but it doesn't create ongoing automatic perfection for future equipment purchases.
0 coins
Miles Hammonds
We ran into this exact issue last year. Had a floor plan financing arrangement where we thought our PMSI status gave us automatic coverage for new inventory acquisitions. Turns out comment 5 meant we needed to file a UCC-1 to maintain perfection on the after-acquired inventory. Cost us a priority dispute when another lender filed first on some of the newer inventory.
0 coins
Anita George
•Ouch. Was this a situation where you were relying on the inventory PMSI automatic perfection and didn't file?
0 coins
Miles Hammonds
•Exactly. We had the purchase money relationship and thought that carried forward automatically. Comment 5 clarifies that automatic perfection is generally limited to the specific goods that created the PMSI, not future acquisitions.
0 coins
Ruby Blake
This is why I always recommend filing even when you think you have automatic perfection. Comment 5 is just one example of how the automatic perfection rules can have hidden limitations. Better to have a filed UCC-1 with proper after-acquired property language than to rely on the automatic rules.
0 coins
Micah Franklin
•Agree completely. We've made filing standard practice regardless of PMSI status just to avoid these interpretation issues.
0 coins
Ruby Blake
•Plus filing gives you the full 5-year term instead of worrying about the 20-day grace periods and other automatic perfection time limits.
0 coins
Ella Harper
I actually discovered Certana.ai's document verification tool when dealing with a similar UCC 9-204 question. You can upload your security agreement and UCC-1 to check if your after-acquired property language is consistent between documents. Caught a discrepancy where our security agreement had broader after-acquired language than what was reflected in our financing statement. Really helpful for making sure everything aligns properly before filing.
0 coins
Anita George
•That sounds useful. Does it specifically flag issues with after-acquired property clauses?
0 coins
Ella Harper
•Yes, it cross-references the collateral descriptions and identifies inconsistencies between your security agreement and UCC-1. Really straightforward - just upload the PDFs and get an instant verification report.
0 coins
PrinceJoe
The practical impact of comment 5 is mostly in niche situations. For standard commercial lending with filed UCC-1s, it's not going to change your analysis. The comment is more about clarifying the boundaries of automatic perfection rather than limiting what you can include in a filed financing statement.
0 coins
Brooklyn Knight
•Exactly. It's important to understand for exam purposes and edge cases, but most commercial lenders won't run into it in practice.
0 coins
PrinceJoe
•Right, and the Official Comments are guidance, not binding law anyway. Courts might consider them persuasive, but they're not statute.
0 coins
Owen Devar
•Though ignoring them entirely is risky since they do reflect the drafters' intent and most courts give them significant weight.
0 coins
Daniel Rivera
just went through this with our legal team last month. comment 5 basically says dont expect automatic perfection to cover stuff the debtor buys later. has to do with the automatic rules being limited in scope. if your filing UCC-1s anyway then this isnt really relevant to your situation.
0 coins
Sophie Footman
•Yeah this is more of an academic issue for most practical situations.
0 coins
Daniel Rivera
•exactly. only matters if your trying to rely on automatic perfection which most commercial lenders arent doing anyway.
0 coins
Connor Rupert
I think there's also a connection to the 9-324 PMSI priority rules here. Comment 5 helps clarify that you can't just rely on automatic perfection for ongoing PMSI priority in after-acquired property - you need to file and meet the other 9-324 requirements for inventory PMSIs especially.
0 coins
Abigail Spencer
•Good point. The inventory PMSI priority rules in 9-324(b) require notification to other secured parties, and that whole framework assumes you're going to file, not rely on automatic perfection.
0 coins
Connor Rupert
•Right, and the notification requirements would be impossible to satisfy if you were just relying on automatic perfection without filing.
0 coins
Molly Hansen
Been doing UCC work for 15 years and comment 5 comes up mostly in bar exam questions and law school hypotheticals. In real practice, if you're doing commercial lending, you're filing UCC-1s with after-acquired property language and not worrying about the automatic perfection limitations. The comment is useful for understanding the theory but doesn't change day-to-day filing practices.
0 coins
Anita George
•That's reassuring. So for our standard equipment and inventory financing, we can continue with our current approach of filing comprehensive UCC-1s?
0 coins
Molly Hansen
•Absolutely. Comment 5 doesn't limit what you can cover in a filed financing statement - it just clarifies the boundaries of automatic perfection.
0 coins
Brady Clean
One thing to watch out for is if you have a mixed situation - some goods where you're relying on automatic perfection and others where you've filed. Comment 5 could create a gap in coverage for the automatic perfection portion if it involves after-acquired property. Better to just file on everything to avoid the complexity.
0 coins
Ruby Blake
•This is exactly why I recommend always filing. The automatic perfection rules have too many variables and exceptions.
0 coins
Brady Clean
•Plus you get better priority protection and don't have to worry about the timing requirements for automatic perfection.
0 coins
Ella Harper
•This is another area where Certana.ai's verification tool is helpful - you can upload multiple UCC documents to make sure you don't have coverage gaps between different filing strategies.
0 coins
Sophie Duck
Thanks everyone for the detailed explanations. This really clarifies things for me. Just to confirm my understanding: since we're filing UCC-1 financing statements for our equipment and inventory loans, Comment 5's limitation on automatic perfection for after-acquired property doesn't affect us. The comment is specifically about situations where lenders try to rely on automatic perfection (like the 20-day PMSI grace period) to cover future acquisitions, which isn't sustainable. For filed financing statements under 9-310, our standard "all equipment now owned or hereafter acquired" language should be fine as long as our security agreement matches. I think our compliance team was overthinking this - Comment 5 is more about preventing people from avoiding filing altogether rather than limiting what can be included in properly filed UCC-1s.
0 coins