By: Danielle Varno
Have you been at a listing appointment recently for, or taken your buyer to see, a home with brand new, beautiful, energy saving solar panels on the roof? Or, perhaps you’ve seen a brand spanking new HVAC system that appears to have just been installed? Even better yet, a seller has just installed a whole house water filtration system! While each of these, and many others, are wonderful qualities in a home and are most certainly great selling/buying features, they can also be indicators of a potential lien known as a UCC fixture filing which if recorded with the Register of Deeds, could impact the sale of real property!
So, what exactly is a UCC filing and why should it concern you as a listing and/or selling agent? To start with, “UCC” stands for Uniform Commercial Code and is the law or laws that govern commercial transactions like the sale of goods (think four wheelers, tractors, yes, even our…pets – anything that is “movable” at the time of its “sale”), commercial paper transactions (think banking and credit transactions), securities (think stocks and bonds) etc., so a UCC filing is the security interest in the good that allows it to be held as collateral for repayment of debt.
Now that I feel like I have taken a walk down memory lane back to my law school days, let’s focus on how a UCC filing can affect Real Property.
There are a few different types of UCC filings, but for our purposes, we are concerned about UCC fixture filings which in the simplest way relate to items that become part of real property (real estate). When a homeowner has a good installed in or on their home (here, solar panels, HVAC systems, water filtration systems, etc.) and that homeowner chooses to finance that purchase via a line of credit, that contractor, business owner, installation company may (and should) file a UCC fixture filing with the Register of Deeds in the county where the real property is located (where the fixture is located). Once a UCC fixture filing is recorded in the correct county and with reference to a property, that security instrument then becomes a lien against that property and, you guessed it, unless expired or cancelled must be paid off before or at closing in order for the homeowner to convey clear title to a buyer.
I should point out, if only as a reminder, fixtures, unless otherwise noted in the Offer to Purchase and Contract, convey with real property by default so please do not remove the HVAC system from the house (that’s a story for another day)!
While recorded UCC fixture filings usually do not warrant catastrophic title issues with regards to selling a home, they can be fatal to a real estate transaction if and when a seller does not have enough equity in their home to cover the payoff of this lien at closing.
So, beware and be warned – those shiny new solar panels on that beautiful new listing may cause you and your seller, to reference the infamous Notorious B.I.G., “…Mo Money Mo Problems…” than you may have originally anticipated!
From one lifelong learner to the next: Stay educated, my friends so that you can continue to… REST EASY.
