A UCC lien is a lender’s security interest in your business’s personal property that’s created by contract and made public through a UCC-1 filing. You can remove a UCC lien by paying or settling the debt, showing that you never authorized the lien, or waiting for the lien to lapse after five years.
If you just discovered a UCC lien filed against your company, know that the term “UCC lien” is short for two different documents.
What is a UCC lien?
A UCC lien is a security interest in personal property created by contract (UCC § 9-109(a)(1)). Pennsylvania’s version is 13 Pa.C.S. Div. 9. It is created when the lender gives value, the borrower has rights in the collateral, and the borrower signs a security agreement describing the collateral (UCC § 9-203).
The second document is the UCC-1, which serves as a public notice of the security interest. The UCC-1 needs only the names of the parties and an indication of the collateral (UCC § 9-502(a)). Lenders file a UCC-1 because perfected security interests are generally prioritized in the order they are filed or perfected (UCC § 9-322(a)(1)). Article 9 of the UCC also applies to the sale of accounts and payment intangibles. So, if an MCA company has purchased your accounts receivable, it may also file a UCC-1; see our article on what to do when a MCA company files a UCC lien on your business.
What’s the difference between a blanket lien and a specific lien?
A UCC lien may cover specific collateral or be a blanket lien on all of it. Under the UCC, collateral can be described by specific listing, by category, by a type of collateral defined in the Uniform Commercial Code, or by quantity (UCC § 9-108(b)). So a specific lien could cover one machine or all your equipment. A statement of “all assets” or “all personal property” is sufficient to describe collateral on a UCC-1 (UCC § 9-504).
Note that a blanket description, like “all of debtor’s assets,” does not reasonably identify collateral in a security agreement (UCC § 9-108(c)). So, the type of collateral covered by a blanket UCC lien will depend on the categories of collateral described in the security agreement that you signed. Security agreements often extend to after-acquired collateral (UCC § 9-204(a)), so a lien on your inventory and accounts receivable may reach inventory and receivables you acquire later.
Other lenders can still lend to you despite a blanket UCC lien, taking a “junior” position. A lender financing a particular piece of equipment may get priority over the first lender by filing a UCC-1 within twenty days after you receive the equipment, and your existing lender may agree to subordinate its lien.
What isn’t covered by a UCC lien?
- Your house. UCC Article 9 excludes liens on real property, except for fixtures (UCC § 9-109(d)(11)).
- Your cars and trucks. With a few exceptions, like when a dealer is selling vehicles as inventory, a UCC filing “is not necessary or effective” to perfect a security interest in a vehicle that has a certificate of title (UCC § 9-311(a)).
- Insurance claims (UCC § 9-109(d)(8)).
- Your business checking account. A security interest in a deposit account is perfected only by “control,” though a lender can follow identifiable cash proceeds of its collateral into your account.
How long does a UCC lien last?
A UCC-1 will lapse five years after its original filing unless a continuation statement is filed (UCC § 9-515). A continuation may be filed in the six months before the UCC-1 expires, and each one extends it for five years. After a UCC-1 lapses, the debtor’s name will remain in the index for one year.
Can you remove a UCC lien?
| Situation | Can the UCC be removed? | Legal basis |
|---|
| The debt is paid or settled, with no commitment to advance further funds | Yes | UCC 9-513(c)(1) |
| You never authorized the filing | Yes | UCC 9-513(c)(4) |
| No continuation in 5 years | It will lapse on its own | UCC 9-515(c) |
| You sold receivables and your customers have paid what they owed | Yes | UCC 9-513(c)(2) |
| The UCC was filed in error, e.g. with the wrong business name | Only a “seriously misleading” error makes it ineffective | UCC 9-506 |
| There is still a valid, authorized debt owed under the UCC | Not unless the lender agrees to release it | N/A |
If a UCC is subject to removal, the lender must file or send a termination statement within 20 days of receipt of demand from the debtor. See, e.g., 13 Pa.C.S. § 9513(c) (the relevant Pennsylvania statute requires a “signed demand”). The 20 days do not begin to run until receipt of a demand, not merely on payment in full. If it fails to, the debtor may file the termination, indicating that the debtor authorized it, and is entitled to $500 in statutory damages, in addition to any actual loss incurred. See UCC 9-625. The Secretary of State will not decide whether a UCC lien is valid; it only accepts or rejects filings on formal requirements. You may file a statement there saying a record is inaccurate or wrongfully filed, but it will not affect the UCC-1’s validity. See UCC 9-518.
For removal steps and sample demand letters, see What is a UCC-1 and How Do I Get It Removed? To check whether there is a UCC lien on your business, see How Do I Check if There is a UCC Lien on My Business?
Commonly Asked Questions About UCC Liens
Can you put a UCC lien on a house or a car?
Generally, no. Article 9 excludes real property except fixtures. Mortgages are filed with the county office that records land transactions, and liens on titled vehicles are perfected through the certificate of title.
Is a UCC lien the same thing as a judgment?
No. A UCC-1 Financing Statement is consensual and must be based on a signed contract. To freeze a bank account, a creditor needs a judgment and then a restraining notice or levy on the bank.
Can someone file a UCC-1 without asking you first?
Signing the security agreement authorizes the secured party to file a UCC-1 covering the collateral it lists, and a UCC-1 can be filed even before the deal is signed. Filing one without authorization is not permitted, and you may be entitled to $500 in statutory damages, in addition to any actual loss you suffer.
How can I find out what a UCC lien covers?
You can send the secured party a Section 9-210 request for a list of collateral. They have 14 days to respond. The first request in a six-month period is free; after that, they can charge up to $25.