UCC Collateral Description Requirements - What Exactly Counts as Valid?

This is good advice. I always tell clients to think about whether someone else looking at the filing could figure out what property is covered without having to guess.

But what about the fixtures issue? That seems like a separate problem entirely if stuff is permanently attached.

That's what I was afraid of. How do I know what counts as a fixture versus regular equipment? Some of this machinery is heavy and connected to power/utilities but could theoretically be moved.

Generally look at intent and method of attachment. If it's designed to be permanent and would damage the building or equipment to remove it, probably a fixture. But this varies by state law.

Had this exact issue last year with a client's factory equipment. Ended up doing both regular UCC-1 and fixture filings to be safe. Better to over-file than under-cover.

Good point about including 'tools' separately. I've seen filings get challenged because small tooling wasn't clearly covered under 'equipment.

What about inventory though? If they're manufacturing, wouldn't you want to cover raw materials and finished goods too?

Depends on the loan structure. Equipment financing usually doesn't include inventory unless it's specifically part of the deal.

Interesting, how does that work exactly? Does it compare the collateral descriptions word for word or look for substantive differences?

It does both - flags exact wording changes and also highlights when descriptions might cover different property. Really helpful for continuation filings where you need consistency.

Easy to say but when you're dealing with an $800K facility, 'probably fine' isn't very comforting. Better to get it right the first time.

Fair point. I just meant don't paralyze yourself over perfect wording when reasonable description is the legal standard.

Yeah but reasonable to who? The debtor, the secured party, or some random third party trying to figure out what's covered?

That's a great point I hadn't considered. The borrower mentioned they might be adding more equipment next year.

Absolutely critical for equipment deals. You don't want gaps in coverage when they trade in old machines for new ones.

Tell me about it. Every state seems to have different quirks and requirements too.

At least we have electronic filing now. Remember when you had to mail paper forms and wait weeks to find out about rejections?

True, but now we get instant rejections for typos instead of waiting weeks for them lol

This is where document review tools really help. We started double-checking all our filings against the underlying agreements after a few close calls.

What kind of complications? Does it invalidate the filing or just create confusion?

Usually creates confusion and potential priority issues. Courts generally look at the security agreement for the actual grant of security interest.

Agreed. I've had good luck with 'all machinery, equipment, tools, dies, jigs, fixtures and other tangible personal property used in operations' for manufacturing deals.

That's helpful language, thanks. Sounds comprehensive without being overly detailed.

Glad it worked out! Always feels good when a filing goes through clean on the first try.

Smart move on the document checking. Those little inconsistencies can cause big headaches down the road.

Did you end up needing separate fixture filings for any of the equipment?

Still working on that part. Turns out two of the CNC machines might qualify as fixtures so we're doing additional filings in the real estate records to be safe.