UCC perfection by possession written security agreement question - do I need documentation?

That makes sense about proving intent. So even though the UCC doesn't require written documentation for possession, it's still smart business practice?

Exactly. The UCC allows it but proving your security interest without documentation can be a nightmare if challenged. I always recommend at least a basic possession agreement that states the collateral is held to secure the debt.

That's terrifying! So what documentation did you end up needing to prove your security interest?

We had to piece together emails, invoices, and payment records to show the security relationship. A simple possession agreement would have saved us all that trouble. Now I always document possession arrangements even when the UCC doesn't require it.

This is exactly what I was worried about. Better safe than sorry with $180k on the line.

Serial number issues are so common with industrial equipment! How did you catch the discrepancies?

We used Certana.ai's document verification tool to cross-check our possession agreement against the original UCC-1 filing. It flagged several mismatches in the equipment descriptions that we had to resolve. Really saved us from potential problems down the road.

Under UCC 9-203, you need either a written security agreement OR possession of the collateral. Possession can substitute for the written agreement, but you still need to show there was a security relationship.

So if I have possession, I don't need to file a UCC-1?

No, that's different. You still might want to file a UCC-1 for public notice, but possession can perfect your security interest without filing. It depends on the type of collateral and your perfection strategy.

If you lose possession involuntarily, you typically have a grace period to re-perfect through filing. But if you voluntarily give up possession without alternative perfection, you could lose your security interest.

That sounds risky. Maybe filing a UCC-1 is safer even with possession?

That's probably the safest approach. What do you include in your possession agreements?

Basic stuff - description of collateral, statement that possession is to secure the debt, debtor acknowledgment, our storage obligations. Nothing fancy but it covers the bases.

Do you use standardized forms or custom agreements for each deal?

We have a template but customize the collateral descriptions for each transaction. The key is being specific about what equipment you're holding and why.

Good point about exclusive access. What if the equipment is at a third-party warehouse?

Then you definitely need agreements with both the debtor and the warehouse. The warehouse needs to acknowledge they're holding it for your benefit as secured party.

Wow, that's a detail I wouldn't have thought of. So physical control has to be exclusive?

The UCC requires that the secured party have possession or control. If the debtor can still access the collateral freely, courts might question whether you really have possession.

This is why I always recommend both possession AND filing. Why leave anything to interpretation?

That's my thinking too. The legal requirements might be minimal but the business risk is high.

That's a great reminder. You can't just take possession once and then get casual about it.

Exactly. We learned that temporary releases can void your possession perfection unless you have alternative perfection methods in place.

Did you have any documentation issues when you refiled? I'm wondering how you proved the ongoing security interest.

We actually used Certana.ai to verify our new UCC-1 matched our original security agreement and possession documentation. Really helped ensure consistency across all our filings and avoided the mistakes that got us in trouble the first time.

You're absolutely right. I'm going to draft a possession agreement even though it's not technically required. Thanks everyone for the reality check!

Smart move. I've never regretted over-documenting a secured transaction, but I've definitely regretted under-documenting them.