UCC mechanics lien priority confusion - filed UCC-1 after work started
Really need some guidance here. We're a commercial equipment financing company and got into a messy situation with a UCC mechanics lien priority issue. Had a client who needed heavy machinery for a construction project - we financed about $180K worth of excavators and bulldozers back in March. Filed our UCC-1 financing statement properly, got our security interest perfected, everything looked good on paper. Here's where it gets complicated. The construction work had already started before we filed our UCC-1 (maybe 2-3 weeks prior). Now there's a general contractor claiming a mechanics lien on the same equipment for unpaid work. The debtor defaulted on payments and we're trying to repossess, but the contractor is saying their mechanics lien has priority over our UCC filing because the work commenced before our financing statement was filed. I thought UCC-1 filings for equipment had priority over mechanics liens, but now I'm second-guessing everything. The equipment is mobile construction machinery, not permanently attached to the real estate. Does the timing of when work started versus when we filed our UCC-1 actually matter for priority? This could affect our entire recovery on the loan and I'm getting conflicting information from different sources about mechanics lien vs UCC priority rules.
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Javier Mendoza
This is actually more complex than most people realize. The key issue is whether your equipment is considered 'fixtures' under your state's UCC Article 9 or if it falls under mechanics lien statutes. Mobile construction equipment typically isn't considered fixtures, which should give your properly filed UCC-1 priority. However, some states have specific carve-outs for construction equipment used in improvement projects.
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Emma Thompson
•Wait, so the timing of when work started doesn't automatically give the mechanics lien priority? I always thought mechanics liens were super-priority liens that trumped everything else.
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Javier Mendoza
•Not exactly. Mechanics liens typically have priority over UCC security interests only when the collateral becomes a 'fixture' or is incorporated into the real property. Mobile equipment that can be easily removed usually stays under UCC Article 9 priority rules.
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Malik Davis
Had a similar case last year with a concrete mixer that was financed vs. a mechanics lien claim. The equipment was mobile (on wheels, not permanently attached) and our UCC-1 filing date controlled priority, not when the construction work began. The mechanics lien claimant tried to argue the equipment was essential to the project, but the court ruled that didn't make it a fixture subject to mechanics lien priority.
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Natasha Kuznetsova
•That's reassuring to hear. Our equipment is definitely mobile - excavators and bulldozers on tracks/wheels. Nothing permanently installed or attached to the property. Did you have to go through litigation to establish priority or did the other party back down?
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Malik Davis
•We had to file a motion to clarify priority rights, but once we presented the mobility evidence and UCC filing dates, the mechanics lien claimant settled. Cost us some legal fees but we recovered most of the equipment value.
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Isabella Santos
You need to check your specific state's statutes because this varies significantly. Some states have 'super-priority' mechanics lien laws that can trump UCC filings even for mobile equipment if it's integral to construction projects. Other states strictly follow UCC Article 9 for non-fixture equipment. The timing of work commencement vs. UCC filing can matter in certain jurisdictions.
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Natasha Kuznetsova
•We're in a state that generally follows standard UCC Article 9 rules, but I'm worried about any construction-specific exceptions. The contractor's attorney is being pretty aggressive about their priority claim.
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StarStrider
•This is exactly why I started using Certana.ai's document verification tool. You can upload your UCC-1 and the mechanics lien documents to instantly cross-check filing dates, debtor names, and identify any potential priority conflicts. It flagged a similar issue for me where the dates were closer than I realized.
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Ravi Gupta
CONSTRUCTION LIENS ARE THE WORST TO DEAL WITH!!! I swear these contractors think they can just claim priority over everyone else's properly filed security interests. Had one try to claim a lien on equipment that was only on the job site for 3 days. The whole system is set up to favor construction trades over legitimate lenders who follow proper UCC procedures.
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Freya Pedersen
•I get the frustration but mechanics liens do serve a purpose - protecting workers and suppliers who improve property. The issue is when they try to extend that protection to equipment financing situations where UCC Article 9 should control.
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Ravi Gupta
•Fair point, but there needs to be clearer lines. If I file a UCC-1 on mobile equipment, that should be the end of the priority discussion. These construction lien laws create too much uncertainty for equipment lenders.
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Omar Hassan
Check if your state has adopted the 'dual notice' requirement for construction equipment. Some states require both UCC filing AND mechanics lien notice filings for equipment used in construction projects. If the contractor didn't file proper mechanics lien notices within statutory deadlines, their priority claim might be invalid regardless of when work started.
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Natasha Kuznetsova
•That's a good point about notice requirements. I'll need to research whether the contractor filed their mechanics lien within the required timeframe and followed all procedural requirements.
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Chloe Anderson
•Also worth checking if they properly identified the equipment in their mechanics lien filing. I've seen cases where contractors filed blanket liens without specific equipment descriptions, which can invalidate their claims against particular pieces of machinery.
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Diego Vargas
This whole situation sounds like a mess. I financed some equipment last month for a construction company and now I'm worried about the same thing happening. How do you even know if there's construction work happening when you're doing the financing? The borrower didn't mention anything about existing work when they applied.
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Javier Mendoza
•Good practice is to include specific representations in your loan docs about no prior construction liens or claims. Also consider requiring the borrower to provide mechanics lien waivers from any contractors working on projects where the equipment will be used.
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Diego Vargas
•That makes sense for future deals. Wish I had thought of that earlier. Do you think I should be worried about existing financing if I didn't get those waivers?
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CosmicCruiser
Had a buddy who went through something similar. Turned out the key was proving the equipment wasn't 'incorporated' into the construction project. Just being used on a job site doesn't make it subject to mechanics lien priority. You need evidence that the equipment remained mobile and wasn't permanently attached or installed.
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Natasha Kuznetsova
•Our equipment definitely remained mobile throughout the project. We have GPS tracking data showing it moved between different job sites. That should help prove it wasn't incorporated into any specific property.
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Anastasia Fedorov
•GPS tracking data is gold for these cases. Courts love objective evidence that equipment maintained its mobile character rather than becoming part of the realty.
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Sean Doyle
I'd suggest running all your financing docs and the mechanics lien papers through Certana.ai's verification system. It can spot discrepancies in debtor names, filing dates, and collateral descriptions that might affect priority. Sometimes there are technical defects in the mechanics lien filing that invalidate the whole claim.
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Natasha Kuznetsova
•That's a smart approach. I'll upload our UCC-1 and whatever mechanics lien documents I can get copies of. Any technical errors in their filing could be our way out of this priority dispute.
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Zara Rashid
•Definitely worth checking. I found a mechanics lien that had the wrong debtor entity name - completely different LLC than what was on our UCC-1. Made their whole priority claim invalid.
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Luca Romano
Quick question - was your UCC-1 filed in the state where the equipment is located or where the debtor is organized? If there's a mismatch and the mechanics lien was filed locally, that could complicate priority even if your security interest is valid.
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Natasha Kuznetsova
•UCC-1 was filed in the debtor's state of organization, which is standard practice. The construction project is in a different state though. Do you think that creates issues with the mechanics lien priority?
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Javier Mendoza
•For mobile equipment, the debtor's state of organization controls for UCC filings. The fact that the equipment is temporarily used in another state shouldn't affect your priority, but the mechanics lien would be filed where the construction project is located.
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Nia Jackson
This is why construction equipment financing is such a headache. Between mechanics liens, artisan liens, and UCC complications, it's a minefield. At least with other equipment types you don't have to worry about construction lien priority issues.
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NebulaNova
•True, but construction equipment financing can be very profitable if you know how to structure the deals properly. The key is getting the right documentation and protections upfront.
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Mateo Hernandez
•I've been thinking about getting into construction equipment financing but stories like this make me nervous. Maybe I'll stick with manufacturing equipment where the collateral stays put.
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Aisha Khan
Update us on how this resolves! I'm dealing with a potential similar situation and would love to know if the mobility of the equipment ends up being the deciding factor for priority. Good luck with the recovery.
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Natasha Kuznetsova
•Will definitely update the thread once we get resolution. Meeting with our attorney next week to develop strategy based on all the great advice here. Thanks everyone!
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Ethan Taylor
•Looking forward to the update. These priority disputes are becoming more common as construction lending increases. Real-world outcomes help all of us understand how courts are interpreting these competing claims.
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Wesley Hallow
This is exactly why I always recommend adding a specific covenant to equipment financing agreements requiring borrowers to immediately notify the lender of any construction projects where the equipment will be used. We also require them to provide advance notice before moving equipment to any construction site. It doesn't prevent mechanics lien issues entirely, but it gives you better visibility into potential conflicts before they become priority disputes. The mobile nature of your equipment should work in your favor here - just make sure you have documentation showing it was never permanently affixed to any real property.
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Justin Trejo
•That's really smart proactive planning! As someone new to equipment financing, I'm learning there are so many potential pitfalls that experienced lenders plan for upfront. The advance notice requirement for construction site usage is brilliant - gives you the chance to get mechanics lien waivers or adjust your risk assessment before problems arise. I'm definitely going to incorporate these covenant ideas into my future deals. Question though - do borrowers typically push back on these notification requirements, or do they see them as reasonable business protections?
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