First Corporate Solutions Blog | UCC, Corporate, Lien, Litigation, Title | Search, Filing, Monitoring » Due Diligence

Post-filing Searches: How Long to Wait to Order a Search to Reflect

FCS/PCTS — Fri, 27 Aug 2010 21:00:42 +0000

During the question and answer period following a recent First Corporate Solutions webinar event, an attendee asked a great question. She asked, “How long should I wait after filing my UCC to order the search to reflect?” This week, we’ll devote a blog post to sharing the answer with all of our readers.

As a refresher, a search to reflect is a search of the UCC records of the office where you filed, after your document has posted to the index. Since you have to wait for the UCC index to “catch up” to your filing date, it can be tricky to know when to place your search request.

Once a document is accepted for filing, the filing office must enter the pertinent lien information into their searchable index. This process takes time and is dependent upon their fluctuating workload. As such, it is impossible to calculate with certainty when to initiate a search to reflect. In most cases, an index date will be only a week or two behind the present date, but occasionally a filing office may fall several weeks or even months behind.

If you are handling your filings and subsequent searches internally, the best way to be certain the index date is sufficient prior to investing in a search is to consult with the filing office as to the currency of their database. If the filing office has an online searchable database, check the index date online; if they require a manual search effort, you can call the filing office and inquire.

For those who work with a private service company to manage UCC transactions, simply request the search to reflect from your vendor at the time you forward the filing. A UCC service provider will file the document and then monitor the index date of the filing office on your behalf. The search to reflect will be performed once the index date has advanced enough to reflect your filing.

Whatever method you choose, remember, a search to reflect is a critical final step in your UCC filing process to confirm proper indexing of your document and to verify your position relative to other creditors.

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Search Tip: Alert Your Searcher if You Expect Hits on Your Public Records Search

FCS/PCTS — Sat, 24 Jul 2010 00:08:34 +0000

Lenders gather information from a variety of sources to create a comprehensive profile of an applicant’s existing financial obligations and gauge their ability to repay debts. By the time the lender is ready to initiate public records searches on a prospect, they often already have an idea of what they expect to find based on applicant disclosures and credit report information etc. However, it is uncommon for a lender to provide this information to their searcher. Herein, we suggest that it is a good idea to alert your searcher if you anticipate findings on your public records search request.

It isn’t “cheating” to let your searcher know that you are expecting certain records to turn up. Any party or lien information you can provide at the outset of the project will greatly improve the quality of your final results. Public records research is not an exact science; filing office records are idiosyncratic and abstracting pertinent information from the index can require some finesse.

Typographical errors occur, filings get indexed incorrectly, and subsequent filings get attached to the wrong original document. If a search does not yield the anticipated results, a well-informed searcher can take additional steps to locate the document and proactively work with the filing office to have the index corrected. Sending them back later to check for a missing lien will only add to your cycle time.

Your searcher wants to do a good job for you. By sharing what you already know, you arm him or her with the information they need to perform thorough research and investigate inconsistencies in the data on your behalf.

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Ordering a Civil Litigation Search: 5 Pieces of Information Your Searcher will Need from You

FCS/PCTS — Fri, 18 Jun 2010 22:41:04 +0000

Conscientious searchers know that an exhaustive pre-funding due diligence investigation will include a search of court records for civil litigation involving their prospect. Not being attorneys however, many are unsure of what to order or what information they will need to provide to get the ball rolling.

In addition to the search name, there are five basic pieces of information you will need to supply in order to secure a relevant and fruitful result. Here is a brief discussion of what information you should be prepared to provide.

1. What Court?

The U.S. Court system contains hundreds of courts, each fulfilling a specific purpose and a serving a defined region of the country. You will need to indicate to your searcher in what court you would like them to search for cases involving your party. What court you elect to search will depend upon where your party resides and the type of cases you are interested in turning up.

For information on what types of cases are heard at which court, please visit the U.S. Courts website at http://www.uscourts.gov/Home.aspx

2. Plaintiff or Defendant?

Are you looking only for cases where your party is listed as defendant in order to learn if they have had suit filed against them or are you also interested to in cases brought about by your party as plaintiff? Or maybe both? Your searcher will be looking to you to advise in what role they should search for your party name.

3. Open and Closed Cases?

Cases remain on a court’s searchable index even after they have been closed. Let your searcher know if you are looking for open cases only (sometime referred to as pending) or if you’d like closed cases reported as well. It is a good idea to work with your searcher up front to clearly define these terms; case status can sometimes be confusing.

4. How many years?

It is also useful to communicate to your searcher how far back you want them to query. The given court’s index may reach back 50 years or more! If very old cases are not pertinent to your transaction, let your searcher know that by asking them to report cases with a more recent file date; a 10 year search is particularly common.

5. Copies of?

Lastly, if any cases are found that match your search parameters, what documents would you like to see from the case? Keep in mind that case files are often large and copies are typically billed at a per page rate. Many people choose to order a certain set of documents from cases that will provide them an overview of what transpired. One frequent copy package includes the docket, complaint and judgment for any cases that were located.

And remember, effective litigation research is a painstaking process that requires a great deal of concentration and expertise. Communicating clear search parameters to your searcher enables them to swiftly and accurately identify cases that are of interest to you.

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FAQ Series #4: How can I reduce my costs for lien searches?

FCS/PCTS — Thu, 15 Apr 2010 23:35:28 +0000

Last week’s blog post offers some practical ideas of ways secured parties can reduce their UCC filing costs. Continuing the conversation on ways to make cuts from due diligence spending without increasing risk, this week we will answer question, “How can I reduce my costs for lien searching?”

Self-search

Much of the price associated with lien searching is the cost of labor. Working with an offline service provider can inflate due diligence invoices because you are paying a premium for the service company’s time, energy and resources to perform your search. To drive down costs, try working with a UCC provider that offers a web-based search system. The fees for self-searching on a privately maintained online system are often much lower than those incurred for a comparable offline search.

Take advantage of broad-based name searching

Another advantage of using an online UCC search system is that many incorporate broad-based searching features. This means that the system will allow users to input a truncated search name and/or wildcard characters in order to reveal name variations. Broad-based name searching can reduce search costs by combining associated names of interest onto a single search report rather than paying separately for each. If you decide to use an online search system, make sure to take advantage of its broad-based name searching capabilities.

Be mindful of copy costs

Most public record search companies charge a per page fee for copies of lien documents that accompany your search report. Active names can generate hundreds of dollars in copies that may not even be relevant to your deal. In cases where your search name is common or you anticipate a large number of hits, you may want to order a “listing only” search to start. Then you can review the report and order copies of only those documents that are pertinent to your transaction.

Monitor for liens

If you run periodic searches on your accounts to watch for changes that may impact their ability to repay debts, consider using a lien-monitoring service instead. Account monitoring providers will perform interval searches of your account names and promptly alert you to any new filings or changes to existing obligations. Monitoring services cost only a few dollars each month and offer an inexpensive and convenient way to stay informed.

Be sure to check back next week for the final post in our FAQ blog series!

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Protect yourself from mis-indexed UCC Filings and Surprise Creditors by ordering a Search to Reflect

FCS/PCTS — Tue, 09 Feb 2010 18:28:41 +0000

In order to perfect their security interest, secured parties should file their financing statements swiftly, on the correct debtor names and in the appropriate filing office. A diligent secured party’s efforts, however, do not end once the filing office acknowledges acceptance of their financing statement. Experienced filers know that at that point they need to initiate a post filing verification search, more commonly known as a “search to reflect.” A search to reflect is a search of the UCC records of the filing office where you filed your lien, after your document has posted to the index.

The benefits of obtaining in a Search to Reflect are twofold:

1. Confirm State Indexing

Tough economic times have forced many filing offices to make cuts to staffing levels and/or hours of operation in order to save money. With fewer employees responsible for that same amount of work, there is an increased chance of typographical errors when indexing filing information. These data entry errors can cause a filing to be difficult to locate in the public record and put secured parties at risk. Now more than ever, UCC filers are encouraged to adopt a search to reflect as a final step in their UCC filing process.

2. Verify Position

Even when a secured party performs conscientious pre-funding due diligence searches, there is a possibility that a surprise lien could sneak in ahead of their Financing Statement or that a lien was missed on their initial search effort. A search to reflect offers assurance of a filer’s priority position to collect on debts by revealing their position relative to any other claim holders.

A search to reflect is a critical step in the due diligence process. If you are not currently performing any post-funding due diligence, consider adding a search to reflect to your filing process. Many private service companies offer filing packages that include a search to reflect for a small additional charge.

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Mitigate Risk with Comprehensive Due Diligence

FCS/PCTS — Thu, 03 Dec 2009 17:33:05 +0000

Given the uncertainty of today’s economy, businesses across the nation are looking for meaningful ways to reduce spending. Lenders however, should be cautious where they make cuts and think twice before cutting too deeply from their due diligence budgets. Now more than ever, lenders need to have a clear picture of a prospect’s financial solvency before making their funding decision.

It is advisable to let your legal and risk management departments determine what searches to perform to best mitigate your risk for loss. That being said, the following due diligence search package provides for comprehensive reporting of existing financial obligations and encumbrances in the public record:

UCCs (and available Tax Liens or Judgments) at the State Level
UCCs/Fixture Filings, Tax Liens and Judgments at the County Level
Civil Litigation at the State Court of General Jurisdiction
Civil Litigation at the U.S. District Court
Bankruptcy at the U.S. Bankruptcy Court

Thorough due diligence searching can help lenders make funding decisions with confidence. For more information on search options, contact a public records professional. Many service companies can customize a search package to meet your specific pre and post-funding due diligence needs.

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What You Don’t Know Might Hurt You: Understanding the Limitations of State Direct UCC Online Searches

FCS/PCTS — Fri, 07 Aug 2009 09:14:46 +0000

A growing number of state filing offices are offering UCC search databases at low to no cost via their websites. In an effort to keep due diligence costs low, many searchers are turning to state direct online databases to fulfill their UCC search requirements.

It’s easy to understand the appeal of these state direct databases – free searches: sounds great, right? When examined closely however, many of these state sites have limited utility due to some serious system limitations.

Here are a few questions to ask when evaluating if a particular state direct search site is the right choice for your firm:

What Lien Types are available on the Index?
Numerous states maintain Tax Lien records (Federal and/or State) in addition to UCC data. However, these lien types may or may not be available to the searching public via the state’s online database. Some states even have a separate online index that requires a second search to locate Tax Liens. To avoid any surprise liens, remember to research what lien types will be included in your results when using a state direct database.

Does the state direct database provide an index date?
Many states that offer an online UCC index do not publish their index date (aka through date) on the website to inform searchers of how current the online data is. Outdated lien information can impede a searcher’s ability to determine current filing status, accurate party names and priority of claims.

Are document images available online?
While a search report can deliver several pieces of critical information, it is usually necessary to view an image of the filed document to see what collateral a given Financing Statement covers. State direct databases that do not offer images online are only providing a piece of the puzzle.

What is the Search Logic?
Before using any state direct online search system, it is essential to have an in depth understanding of the type of search logic it employs. For example, does the state site allow for the entry of truncated search strings? Does the system report similar names? These features allow searchers to reveal name variations and uncover filings that may have been mis-indexed.

Keeping track of the ins and outs of the various state direct search sites can be a daunting task. Try using a proprietary search system to streamline your search process. Privately maintained and operated, these systems offer consistent search logic, easy to read results and a support staff to provide training and ongoing support.

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UCC Searching in Delaware

FCS/PCTS — Fri, 17 Jul 2009 19:43:06 +0000

As we’ve discussed before, all UCCs are not created equal. Some states have online access to their UCCs with broad-based search logic, and others go by the strictest letter of RA9; Delaware falls into the latter category. The problem with this is that Delaware is an exact-name state, meaning that not only are UCCs indexed exactly as the name is typed into the debtor box on the UCC, but when you perform a certified search with the DE SOS (and that’s the only option they give you) you are only getting search results for the exact name you entered. Yes, certain noise words and corporate endings are dropped, but Delaware search logic means that if you search the name “ABC Company,” you’re not going to get any results for “ABC Company, a Delaware Corporation.” This is important information to keep in mind when you’re filing a UCC as well; if you’re filing a UCC and enter the debtor name as “ABC Company, dba DEF LLC,” that’s exactly how the Secretary of State will index that filing.

The other issue is that since Delaware requires that you run a UCC search through an agent (they publish a current list of agents on their website), it’ll be dumb luck whether you’ll get one that will search and provide name variations. Because the folks processing the searches tend to each process a little differently depending on how long they’ve been in the industry and with whom they trained, the processes might even be different within the same company from person to person. The bottom line is, if you want name variations, just make sure you ask when you place your search request with someone; some provide them with all searches, some will charge an additional fee to provide them, and some won’t provide them at all. It’s important to know into which category your service provider falls to ensure you’re not missing any important liens when you’re performing your due diligence.

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Wondering What Parties to Search as Part of Your Prefunding Due Diligence?

FCS/PCTS — Wed, 13 May 2009 21:41:24 +0000

Searching for the right party is imperative when coordinating due diligence search efforts. This may seem simple, but keep in mind that liens could be filed under business names, individual names, aliases or nicknames, even fictitious business names. So, how can you be sure you are searching for the right name?

Here are a few pointers to get you on the right track:
1. Check corporate charters to determine the exact legal name before performing liens searches on a business.
2. Utilize online UCC search systems that allow for broad-based name searching to reveal name variations.
3. Be mindful of jurisdictions where exact name or Revised Article 9 search logic is employed. Searches performed in these jurisdictions will not include any similar names on your search result.

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