Liens - UCC-1 & Trust Deeds

 
Liens are a form of notice filed with the government to tell the world that a piece of property is being used as collateral to ensure that the lender is re-paid on a loan. If the borrower stops making payments on the loan, the lender has the right to foreclose on the property, or sell it at a public auction. The proceeds of this sale are used to reduce the loan balance. In California, the two main types of liens used by lenders are the trust deed and the UCC-1.


Trust Deeds

Instead of using mortgages in California, lenders use trust deeds as liens on real estate. If, for example, a home buyer cannot buy a house for all cash, he or she applies to a bank for a loan. The bank records a trust deed with the local county recorder to give notice to the world that the bank has made a loan to the borrower, and that this specific piece of property is collateral for the loan. If the home buyer stops making payments on the loan to the bank, the bank can foreclose on the trust deed. After a waiting period lasting a minimum of three months and three weeks after filing a Notice of Default, there is a foreclosure sale. At the foreclosure sale in California, the highest bidder can buy the house. After the foreclosure sale, the home buyer loses the house and must move out. The buyer at the foreclosure sale becomes the new owner. Sometimes the bank “buys” the house at the foreclosure sale with a credit bid (all or part of the loan balance) and becomes the new owner.


UCC-1

Just as mortgages and trust deeds are used to secure real estate, UCC-1's are used in the United States to secure personal property, like equipment. Using a UCC-1 in the United States, a lender can take personal property as collateral for a loan. If the borrower defaults on the loan, the lender can foreclose on the personal property specified in the UCC-1.

Canada has a system similar to the one used in the United States called the Personal Property Security System. Mexico, however, has nothing comparable. Instead, it has developed a different system. Unlike the United States and Canada, there is no central registry.

Technically, the UCC-1 used in the United States is simply the name of a form. UCC stands for Uniform Commercial Code. Generally speaking, this form is filed with the secretary of state in the state where the personal property is located. The secretary of state keeps the information on the UCC-1 in a data base, which allows others to search the records to determine whether a company has borrowed money and whether certain of the company's personal equipment is being used as collateral for the loan.

At Baker Law Group, we understand the complexities of the laws governing UCC-1's and trust deeds. We start with a knowledge of the framework and how it applies to your case. Of course, specific legal research will be needed to apply the specific facts of your case, but we know what specific law to look for to support your case.