Legal Question in Business Law in California

Re: question on filing a UCC-1

Disclaimer: The materials provided below are informational and should not be relied upon as legal advice.

I am not clear from your question what the borrower is putting up as collateral for this loan. Generally, in order to have a secured loan under California's Uniform Commercial Code ("UCC"), the brrower and the lender need to sign a promissory note and a security agreement, lender needs to file a UCC Financing Statement (commonly known as "UCC-1"), and lender needs to lend the money (or give other thing of value) to the borrower. You can find the forms at most law libraries. You should consult your own attorney to protect your legal rights.

Re: question on filing a UCC-1

A UCC-1 is used to declare to the world that you hold a security interest in certain property of the debtor named therein. If you don't have a security interest, you aren't entitled to file a UCC-1 and doing so might make you liable to the debtor for damages (if, for example, the improper UCC-1 deterred someone else from lending to, or doing other business with, the debtor. Also, knowingly making a false filing is probably at least a misdemeanor and might be a felony.

On the other hand, you don't file the security agreement - you file only the UCC-1 itself (and occasionally an attachment form). The collateral is described on the UCC-1, which is available on the California Secretary of State's Web site at www.ss.ca.gov and then look for UCC forms and filings (try the business portal). I believe you can fill out and file the form on line, but the SS has been tinkering with this feature recently, and on-line filing may not be available at this time.

If you didn't get an agreement making certain property collateral for the loan, you could try to get one now, but I'd get legal advice before doing so, since tinkering with loan terms afterwards might result in unintentional replacement of the existing obligation with a completely new one with different terms (by a process called "novation").