UCC Article 9 Asset Purchase - Need Help with Lien Release Timeline
We're finalizing a UCC Article 9 asset purchase for a manufacturing equipment deal worth about $850k and I'm getting conflicting advice from our attorneys about the lien release sequence. The seller has existing UCC-1 filings on most of the equipment we want to acquire, and we need those liens properly terminated before closing. Our lender is requiring clean title on all assets before they'll fund our acquisition loan. The seller's attorney says they can handle the UCC-3 termination filings after we close, but our counsel insists the terminations need to be filed and showing as effective in the state database before we transfer any funds. This is holding up a deal that's been in negotiation for 6 months. Has anyone dealt with this timing issue in an asset purchase? I'm worried about getting stuck with equipment that still has active liens if something goes wrong with the termination process. The equipment is currently located in three different states which adds another layer of complexity to the whole UCC filing situation.
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Fatima Al-Farsi
Your counsel is absolutely right on this one. Never close before the UCC-3 terminations are filed and effective. I've seen too many deals where the seller promised to handle terminations post-closing and then disappeared or had financial problems. Once you've paid, you have zero leverage to force them to file those terminations.
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Dylan Cooper
•This is solid advice. The UCC-3 termination has to be filed by the secured party anyway, so if the seller's lender goes belly-up after closing, you could be stuck with equipment that has active liens forever.
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Sofia Perez
•Exactly! And with equipment in multiple states, you're dealing with different filing systems and timing. Some states take 24-48 hours to show terminations as effective in their databases.
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Dmitry Smirnov
I ran into this exact situation last year with a $1.2M equipment purchase. The seller kept pushing for post-closing terminations to speed things up, but we held firm. Good thing too - turned out one of their lenders had some internal issues and it took an extra week to get the UCC-3 termination authorized and filed. Would have been a nightmare if we'd already closed.
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ElectricDreamer
•How did you verify the terminations were actually effective? Just checking the state databases or did you use some kind of verification service?
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Dmitry Smirnov
•We actually started using Certana.ai's document verification tool after that deal. You can upload the UCC-1 and UCC-3 PDFs and it instantly cross-checks everything - debtor names, filing numbers, collateral descriptions. Catches inconsistencies that could void the termination. Saved us from a filing error that would have left one piece of equipment still encumbered.
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Dylan Cooper
•That sounds helpful. Manual document comparison is such a pain and it's easy to miss critical details when you're dealing with multiple filings across different states.
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Ava Johnson
Why can't you just escrow the termination process? Have the seller deposit the UCC-3 terminations with a title company or escrow agent, then they get filed simultaneously with closing. That way everyone's protected and the deal doesn't get delayed.
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Fatima Al-Farsi
•Escrow doesn't solve the timing problem. UCC-3 terminations need to be filed by the actual secured party, not an escrow agent. And if there are errors in the termination documents, you won't know until after closing when it's too late to fix easily.
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Ava Johnson
•Good point about the secured party requirement. I was thinking the seller's lender could pre-sign the terminations and have them held in escrow, but you're right about the error risk.
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Miguel Diaz
This is why I HATE these complex asset deals. Every attorney has a different opinion and meanwhile the deal sits there dying a slow death. Can't you just get title insurance to cover any lien issues and move forward?
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Giovanni Moretti
•Our lender specifically excluded UCC lien coverage from the title policy requirements. They want clean UCC searches showing no active filings before they'll fund the acquisition loan.
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Miguel Diaz
•Of course they did. Lenders always want to transfer every possible risk to the borrower while taking zero themselves.
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Zainab Ahmed
•To be fair, active UCC liens on the collateral would put the lender in second position or worse. They need first priority to justify the loan terms.
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Connor Byrne
Have you confirmed that all the existing UCC-1 filings are actually still effective? Some of them might have lapsed if they're over 5 years old and weren't properly continued. That could simplify your termination requirements.
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Giovanni Moretti
•That's a really good point. I need to pull the filing dates on all the UCC-1s. A couple of them looked pretty old when I reviewed the UCC search results.
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Connor Byrne
•Yeah, definitely check the continuation status. If any have lapsed, you don't need terminations for those - they're already ineffective. Just make sure your title work reflects the lapse dates correctly.
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Yara Abboud
Whatever you do, don't let them rush you into closing without proper lien clearance. I bought equipment at auction once thinking the liens would be cleared as part of the sale process. Nope. Ended up fighting with two different secured parties for months trying to get clear title. Cost me way more in legal fees than the equipment was worth.
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PixelPioneer
•Auction sales are totally different though. Those are usually 'as-is' with no title warranties at all.
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Yara Abboud
•True, but the principle is the same - never assume someone else will handle UCC issues after money changes hands. Get it sorted up front or don't do the deal.
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Keisha Williams
Can you structure this as an asset purchase with seller financing? That way the seller keeps security interest in the equipment until your lender funds, then you use the loan proceeds to pay off the seller and they release their UCC-1 at the same time they terminate the other liens.
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Giovanni Moretti
•Interesting idea but our lender wants to be the only secured party. They won't fund if there's seller financing that creates competing security interests.
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Keisha Williams
•Makes sense. Most acquisition lenders want clean collateral without having to subordinate to seller financing.
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Paolo Rizzo
This is exactly why I started using Certana.ai for all our UCC verification work. You upload the existing UCC-1 filings and the proposed UCC-3 terminations, and it instantly flags any mismatches in debtor names, filing numbers, or collateral descriptions that could cause the termination to be ineffective. Way better than trying to manually compare documents, especially when you're dealing with multiple states and different filing formats.
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Sofia Perez
•How accurate is it with debtor name variations? That's always been our biggest issue - slight differences in entity names between the original UCC-1 and the termination.
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Paolo Rizzo
•It's really good at catching those subtle differences that human eyes miss. Plus it verifies that all the collateral in the original filing is properly addressed in the termination. Saved us from a partial termination that would have left some assets still encumbered.
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Amina Sy
Just went through something similar with a $600k equipment purchase. Seller's bank was dragging their feet on the UCC-3 terminations because they needed internal approvals. We ended up extending the closing date twice before everything got sorted out. Frustrating but definitely better than closing with active liens.
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Giovanni Moretti
•How long did the whole termination process take once they finally got moving on it?
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Amina Sy
•About a week from when they filed the UCC-3s to when everything showed up as terminated in all the state databases. The actual filing was quick, but waiting for the database updates took time.
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ElectricDreamer
•That's pretty typical. Most states update their UCC databases within 24-48 hours, but some take longer especially if there are any data entry issues with the filing.
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Oliver Fischer
Why not make the UCC terminations a condition precedent to closing? Put it right in the purchase agreement that seller must provide evidence of all UCC-3 terminations being filed and effective before the closing can occur. That way it's legally binding and not just a gentlemen's agreement.
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Giovanni Moretti
•We actually do have that language in the purchase agreement, but the seller is pushing back saying it's going to delay closing unnecessarily. They want to close and handle terminations the same day.
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Oliver Fischer
•Same day filing and database updates are risky. What if there's an error in the UCC-3 and it gets rejected? Then you're stuck having already closed with liens still active.
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Fatima Al-Farsi
•Exactly. UCC filings can get rejected for all sorts of reasons - wrong debtor name format, incorrect filing fees, missing information. Better to file early and fix any problems before closing.
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