This is a question that comes up often, whether in Q&A session during our educational webinars, on the phone with clients or submitted through social media. In response, we wanted to outline some best practices to keep in mind during the UCC filing and process.
It is critical for a secured party to file timely continuations, as a lapsed filing ceases to be effective and opens the door for a subsequent filer to move into a priority position. The Uniform Commercial Code sets forth strict guidelines on when Continuations can be filed, but the rules can be confusing.
Here are a few tips to help you determine when to file:
1. Keep an eye on the Lapse Date
A UCC1 financing statement is effective for a period of five years from its date of filing. Every Financing Statement has a filing date and a corresponding lapse date. In order to extend the term, a secured party must file a continuation statement prior to the UCC1’s lapse date.
2. Six Month Window
The Uniform Commercial Code establishes that a Continuation Statement is acceptable for filing only within six months of a UCC’s lapse date. Continuations presented for filing prior to the six-month window will be refused by the filing office.
3. Watch the Original Filing Date
A Continuation Statement extends the term of the Financing Statement for an additional five years from the date of the original UCC1 filing, regardless of the filing date for the Continuation Statement. A filing’s lapse date is always calculated from the filing date (month and day) of the original Financing Statement.
To simplify the process, try working with a service company that offers a web-based UCC portfolio management tool. Many online UCC filing systems include UCC tracking features that will alert you when filings are nearing their lapse date, allowing you ample time to prepare continuations.