What Is a Continuation Remark?
A continuation remark is an amendment hooked as much as a UCC-1 financing remark. Continuation statements prolong the lender’s lien on the borrower’s collateral earlier the original financing remark’s expiration date. When a lender data a continuation remark, the continuation remark extends the UCC-1 financing remark by way of 5 years from the date of filing.
Continuation statements need to be filed with the best authority, which varies in line with the jurisdiction. However, typically they must be filed with the secretary of state.
Key Takeaways
- Continuation statements are statements that extend the lender’s lien on a borrower’s collateral earlier the original expiration date.
- They lend a hand lenders maintain a priority position to gather debt.
- Continuations statements are also referred to as UCC-3 continuations statements on account of they test with the Uniform Business Code (UCC), a selection of regulations that govern industry transactions.
Understanding Continuation Remark
Continuation statements must be filed throughout the six months prior to a UCC-1 financing remark’s expiration. Statements filed out of doors of this window are refused, whether or not or no longer they’re filed too early or too overdue. Thus, lenders must keep apply of when their financing statements expire, in an effort to avoid missing their choice to extend them.
When a lender data a continuations remark, they need to identify the initial UCC-1 financing remark that it amends. If vital, a lender data additional continuation statements to extend the financing remark for additonal categories of five years.
Some other people title continuation statements UCC-3 continuations statements, on account of they test with the Uniform Business Code (UCC), which is a selection of regulations that govern industry transactions. This code tries to simplify and give an explanation for the principles spherical industry transactions and lead them to consistent during jurisdictions. The UCC states {{that a}} lender’s lien on a borrower’s collateral ends after a period of five years. However, if the loan in question extends for longer than 5 years, the lender typically data a continuation remark for their own protection.
Why Report a Continuation Remark?
Continuation statements protect lenders by way of helping them to maintain a priority position throughout the fit that they need to acquire a debt. Regularly, borrowers default on a few cash owed straight away, on account of financial hardship or simply because they’ve taken on too many loans. When this happens, a few creditors perpetually attempt to acquire at the ones cash owed straight away.
If a lender has not filed a continuation remark for a specific financing remark, that remark ceases to be environment friendly. Once it is not environment friendly, other lenders who have filed financing statements achieve priority status when in search of to gather on a debt.
Some transactions with financing statements do not require continuation statements in an effort to ultimate for longer than 5 years. For example, a financing remark filed in connection with a public-finance transaction or a manufactured space every so often lasts for 30 years.
Example of Continuation Remark
Monetary establishment A extends a $100,000 loan to a farmer at the side of his tractor as collateral on Jan. 1, 2015. While the established order data a three-year financing remark, it forgets to report a continuation remark. 3 years later, the farmer, who however has not paid once more his loan in whole, puts up the tractor as collateral with Monetary establishment B. Monetary establishment A data a continuation remark on Jan. 31, 2018, after the lapsing of its financing remark, and claiming the tractor as collateral. However, the court docket comes to a decision that Monetary establishment B gets precedence over Monetary establishment A in claiming the tractor as collateral.
