Evaluating State UCC Search Options Series # 4: Drawbacks of a State Direct Database Search
UCC, Due Diligence
On the surface, a state direct database search appears to solve several of the key problems associated with a certified search. A certified search is expensive while a state direct database is offered at low to no cost on a state’s website. Whereas turn-around can be slow for a certified listing, a state direct database search offers immediate results. A certified search uses exact name search logic, but a state direct search engine may incorporate broad-based name searching features. Experienced searchers have learned though that there is no perfect solution when it comes to UCC searching. What follows is a discussion of some potential drawbacks of a state direct database search.
Availability of Lien Types
The first pitfall to consider is the availability of lien types on the state direct search system. In jurisdictions where the state filing office administers tax lien and/or judgment lien records in addition to UCCs, these additional lien types may or may not be available on their online search system. Some states even have a separate online index that requires a second search to locate tax liens and judgment liens, increasing the likelihood that a searcher could miss a critical lien.
Index Date
Further, several states that offer an online UCC index do not post their index date (aka through date) on the website to inform searchers of how current the online data is. It is important for searchers to interact with up-to-date lien records since outdated lien information makes it impossible to establish current filing status, accurate party names and priority of claims.
Document Images
Many states that offer an online search feature on their website provide a “listing only,” meaning they do not offer online images of documents. A search report can deliver several pieces of critical information (filing numbers and filing dates, party names and addresses, in some cases even collateral type), but it is usually necessary to view a copy of the actual filed UCC1 Financing Statement to see the specific collateral that is covered by the Financing Statement.
For more information on state direct UCC searches, please read our previous blog post, What You Don’t Know Might Hurt You: Understanding the Limitations of State Direct UCC Online Searches.
Check back next week for the Benefits of a Proprietary Database Search!