Drawbacks of a Certified UCC Search – FCS Greatest Hits #6
UCC, Online UCC System, Due Diligence, Revised Article 9
The final installment in our Greatest Hits blog series covers state certified UCC searches, aka UCC11s. There are times when you might want to request a certified search, they do serve a purpose. But, because of their oftentimes narrow search logics which can inhibit a searchers ability to uncover name variations, thorough due diligence typically requires utilizing a broad-based search solution that is designed to uncover and include similar names in its search results, especially when searching indexes that include mixed lien types.
Drawbacks of a Certified Search
Locating Tax Liens
The first potential problem with a certified UCC search relates to locating tax liens. Many state filing offices administer tax lien records in addition to UCC’s. In some states, tax lien records are maintained on a separate index from UCC’s, while in other states the UCC and tax lien records are housed on a single searchable index. The single-index arrangement can cause problems for searchers.
The Uniform Commercial Code does not govern tax liens. While a UCC filer must list the exact legal name of their debtor in order to ensure the effectiveness of their filing, there is no such requirement for a government agency filing a notice of tax lien. Since a tax lien filer is not held to the same naming standard as a secured party filing a UCC Financing Statement, an active tax lien may not show up on a certified search using exact name search logic.
Exact Name Search Logic Increases Search Costs
Another drawback of a certified search is price. Most state filing offices charge between 15-25 dollars for a certified search. Sounds reasonable, right? Not so fast, keep in mind that a certified search will most likely not include any similar names. Due to the restrictive search logic used to generate a certified listing, you may have to order a separate certified search for each name variation you can think of and those fees can add up rather quickly. Exact name search logic, as used by state filing offices, increases your overall search costs.
Turn Around Time
Lastly, the turn-around time for a certified search can be slow. It is not uncommon for a state to take 5-7 business days to return a certified listing and for many lenders who are using UCC search information to help make an informed funding decision, that’s just too long to wait.