When requesting a UCC search as part of a pre-funding due diligence investigation, do you ask your service provider to report filings found under similar names? What if you are self-searching using an online system, do you employ flexible searching techniques like using wildcard characters to reveal name variations?
If not, you are not alone. The Uniform Commercial Code establishes clear rules for how a secured party must list debtor names on a UCC Financing Statement to perfect its security interest. Owing to these strict guidelines, some people choose to perform “exact name” searches to reveal only those filings that match the prospect name precisely, since these are the filings that could represent a prior claim.
If you typically perform an exact name search, here are 3 good reasons to consider expanding your search efforts to include filings under similar names.
1. Mis-Indexed Filings
The indexing of UCC filings is still largely a manual process and unfortunately typographical errors do occur. The most dangerous indexing errors are those involving debtor names. A UCC Financing Statement that lists the debtor name properly according to Uniform Commercial Code standards, but is then entered incorrectly into the state index will not reflect on a search using exact name search logic. In the event of a mis-indexed debtor, a broader search to include filings under similar names may be the only way to locate the filing in the public record.
2. Filings That Contain Errors
Those who prepare UCC filings occasionally make mistakes too. If a UCC Financing Statement is submitted for filing and it contains a misspelled debtor name, that is the way the filing office will enter the name into the index. Under the Uniform Commercial Code, the filing officer’s responsibilities are ministerial and do not include checking a document for accuracy. As with a mis-indexed filing, an exact name search will not uncover the record, but a search using less restrictive search logic could. And while a UCC filing that lists the debtor name incorrectly may not represent a competing claim, a lender that is piecing together a financial history for a prospect would still likely want to know about it.
3. Federal Tax Liens
Many states maintain Federal Tax Lien records alongside their UCC records. In these jurisdictions, a search will include both UCCs and tax liens that appear on the index. While secured parties must adhere to stringent rules for naming debtors on UCC filings, government agencies are not held to the same strict standard. The IRS is not required to precisely identify the taxpayer on a Notice of Federal Tax Lien; they can claim priority even if the lien lists a variation of the taxpayer’s legal name. Consequently, it is imperative to include name variations to be certain you have uncovered all Federal Tax Liens of record.
>> Your Top Tax Lien Searching Questions Answered Here!
The CLAS online DIY Search™ system provides users with anytime, anywhere access to perform UCC and lien searches using the most accurate and current UCC and lien data available. Our flexible search logic enables searchers to identify name variations and uncover difficult-to-locate liens including mis-indexed filings, filings that contain errors and Tax Liens.
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For informational purposes only; content does not constitute legal advice.