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UNIFORM COMMERCIAL CODE FILINGS
The perfection and discharge of a security interest in any property for which has been issued a Kentucky certificate of title shall be by notation on the certificate of title (186A.190)(1). The sole means of perfecting and discharging a security interest in property for which a certificate of title is required by this chapter is by notation on such property's certificate of title (186A.190(2)). Property Required to be Titled (186A.070) Vehicle, manufactured home or trailer. Motorboats 186A.015, 235.055. Vehicle is defined at 186.010(8)(a). Requirements for Filing a Title Lien Statement A title lien statement must have the following information to be filed:
Place of Filing Generally, a title lien filing should be made in the county of the debtor's residence, if an individual, and in the county of principal headquarters of a resident business or in the county of principal use of the titled property, if the business or individual is a nonresident. Filing Fees
Note: While KRS382.240 does not set a specific postage charge, the Clerk's Association has adopted a $1.00 per instrument minimum postage fee. $17.00 Total fee for filing and discharging a title lien per item of titled property. Partial Terminations There are no circumstances that produce title lien partial terminations. Duration of Filing Once a title lien is noted upon the face of a certificate of title, it is permanent unless released in writing by the secured party of record. A notation upon a title does not expire by the passage of time, as do other types of UCC filings. Late Filing of Title Liens Statutory law requires the secured party to file the lien within fifteen days of its execution by the debtor. If not timely filed, a penalty of $2.00 is assessed by the County Clerk as a prerequisite for filing, together with the regular filing fee (186A.200(2)). If a title lien statement is not dated, a $2.00 fee is charged because the clerk's office has no way of knowing when the document was executed. Transfer of Ownership Ownership transfer is prohibited until any and all existing lien notations are terminated in writing by the secured party of record. This termination must be filed in the county where the lien was filed. Only the county where the lien is filed may cancel the lien in the AVIS. Any repossession transaction processed by a secured party must be processed in the county where the first lien was filed. Occasionally, a first lien is filed in one county and a second lien is filed in another county. A secured party would submit the proper documents to the county where the first lien is filed. That county would forward a photocopy of the repossession affidavit (form TC96-192) executed by the secured party of record to the county where the second lien is filed. The second county would use the copy of the repossession affidavit received as a termination statement and terminate the lien in their records and in AVIS. Requirements for repossession:
Some secured parties will file an amendment to change their mailing address. No other situation requires or permits amendments to title lien statement filings. Since title lien notations are permanent, a continuation statement pertaining to title liens is not permitted or required and therefore do not exist. Secured parties often sell or trade loans among themselves. When this occurs, they are required to file an assignment in the county where the original lien is filed. That county will process the assignment on its index, attach the assignment to the original title lien statement and input it into the AVIS. The fee for an assignment is $9.00 per title lien. The secured party is required by statute to file a termination within ten days after the loan is paid in full (186.045(2)). This termination must be filed in the county where the lien was originally filed. The clerk shall within five days note the termination in his records and enter same into AVIS. When the owner of the vehicle presents his title to ANY COUNTY CLERK in this state. KRS186.045(3) requires any clerk to access AVIS and note the termination on the title, the county where the termination was filed and place their seal on the title. The clerk must retain termination statements for two years from the date of filing. After the two-year period, the clerk may destroy the termination statement. Any titled property is prohibited from being transferred to a different owner unless the lien notation is released in writing. However, numerous situations occur that promote the need to transfer the titled property from the current owner names to a different name or names (divorce, etc.). A transfer of equity is simply the written permission of the secured party to remove the existing lien temporarily, process the transfer and then refile the lien into AVIS immediately, so the same lien will appear on the new title. The fee for this is $17.00 and treated like a new lien filing in all respects, except you retain the original file number and attach the document to the original title lien statement. This transfer transaction must be performed in the county where the subject lien is filed. Clerks are regularly requested to place a variety of other liens against titled property. Liens on titled property are limited to commercial liens. The title document and the AVIS system have a maximum capacity of only two liens at any time per titled property. You may file lis pendens, judgement liens, mechanics liens, etc. in your regular place for filing such liens, however, they are 100% ineffective since they do not have and cannot appear on the title document. Referring you to the prevailing statute, the only means of perfecting a lien for titled property is by its notation on the certificate of title. Inventory of Motor Vehicles Titled property dealers borrow money on their inventory sometimes referred to as floor plans. The lender (secured party) will file a regular UCC filing stating, the inventory of motor vehicles currently in inventory or hereinafter acquired into inventory. This terminology circumvents the legal requirement for individual title lien statements for each vehicle or other titled property. Whenever a repossession occurs on dealer inventory, a separate set of repossession documents are required for each vehicle repossessed, regardless of the number repossessed. Title Document Transmittal Each day AVIS produces for each county a list of title applications processed by the county the previous day. Each clerk when assembling this transmittal for submission to Frankfort should recheck this transmittal and confirm that each title application that denotes a lien has been or will be applied for and double check that each such application has had a lien notation pended in AVIS. Each such application with a pended lien has an asterisk by its title number on the transmittal computer sheet. Of course, if the lien is fully filed on the date of title application, this symbol is omitted by AVIS. Consequently, it is extremely important for the Clerk to determine whether a title application dictated a pending lien or the requested lien was fully filed or in error omitted when processing the title application transmitted the next business day. Clerks have been held liable for the damages caused to secured parties due to liens being omitted from the title document due to clerk error. Terminations Via Fax Frequently our citizens move from county to county. Often a patron will appear in a county to transfer a vehicle which has a lien filed in a previous residence county. Many times the patron will have in their possession a termination statement executed by the record lienholder. Many counties handle this situation by faxing the lien release to another county from one county clerk office to another county clerk office. The county receiving the original copy of the termination will follow up by mailing the document to the proper county. The county receiving the fax will use the fax copy of the termination as their record for releasing the lien in AVIS until they receive the original from the other county involved. This works well for the counties that participate. No County Clerk should release a lien in AVIS without having in their possession a fax copy of a termination statement or the original. A lien should never be terminated on the basis of a mere telephone request. Change of Address The address listed on a Kentucky Certificate of Title is immaterial in determining which county is the proper place to file a title lien statement. No updated title showing a current residence address is required. The debtor need only furnish their corrected address to be updated in AVIS. Liens Left Off Titles (186A.240) Whenever it comes to your attention that a title has been printed without a lien notation due to error by the County Clerk, KRS186A.240 authorizes you to cancel that title, attempt to get it from the citizen and reissue a corrected title. You should write the citizen and give them forty-eight hours to return the title to your office. In the meanwhile, cancel that title in AVIS and immediately apply for a corrected one showing the lien notation. If the citizen has already filed for bankruptcy, you cannot correct the error. Internal Revenue Seizure Sales Valid commercial liens showing in AVIS are not automatically eligible to be terminated by IRS sales. Mobile Homes - Real Estate Confusion on how liens are filed on mobile homes after they become attached to real estate has been cleared up by the Court of Appeals (KY 946 S.W. 2d, 196 Hiers v. BankOne). The Court of Appeals has determined that permanently tied down or not, the only way to secure a lien on a mobile home is by notation on a title, period. Requirements for Filing a Financing Statement - (355.9 -402) Filing fees Name(s) of the debtor and secured party Signature of the debtor Address of the secured party Mailing address of the debtor A statement indicating types, or describing the items of collateral If the financing statement covers crops growing or to be grown, a description of the real estate concerned must describe the production season A copy of the security agreement is sufficient as a financing statement if it contains the above information and is signed by the debtor. A carbon, photographic or other reproduction of a security agreement or a financing statement is sufficient as a financing statement if the security agreement so provides, or if the original has been filed in this state or in any other state. A financing statement which otherwise complies with the foregoing information is sufficient when it is signed by the secured party instead of the debtor if it is filed to perfect a security interest in: Collateral already subject to a security interest in another state when it is brought into the state or when the debtor's location is changed to this state. Such a financing statement must state that the collateral was brought into this state or that the debtor's location was changed to this state. Proceeds under 355.9 - 406 if the security interest in the original collateral was perfected A lapsed filing Collateral acquired after a change of name, identity or corporate structure of the debtor. Filing Fees - (KRS 64.012)
The fee collected at filing includes the fee for termination and for sending or delivering the terminated instrument and financing statement (355.9 - 403(5)) Duties of Filing Officers - (355.9 - 403) The County Clerk shall mark each financing statement or security agreement with a file number together with a date and hour of filing. The County Clerk shall hold the statement or a microfilm or other photographic copy thereof for public inspection. The County Clerk shall index the statements according to the name of the debtor and shall note in the index the file number and address of the debtor given in the statement. When the security agreement covers timber to be cut or covers minerals, including oil and gas but excluding coal, or is filed as a fixture filing or covers crops growing or to be grown, the filing officer shall index it under the names of the debtor and any owner of record shown on the financing statement in the same fashion as if they were mortgagors of the real estate described. The filing officer may remove a lapsed financing statement from the files and destroy it after one (1) year after the lapse (KRS 355.9 - 403(3)). Place of Filing - (KRS355.9 - 401) Generally, it is not the duty of any clerk to determine the proper place of filing any security agreement. The best course of action is to file the document and allow the secured party to worry about whether your county was the statutory proper place to file. If you believe that your county was offered the filing in error, contact the secured party before rejecting the filing. Your liability is greater if you, in error, reject a filing. Duration of Filing - (KRS355.9 - 403) A filed financing statement is effective for a period of five years from the date of filing. The filing lapses on the expiration of the five year period unless a continuation statement is timely filed prior to lapse. CONTINUATIONS - (355.9- 403) A continuation statement may be filed by the secured party within six (6) months prior to the expiration of the filing. The continuation statement must be signed by the secured party of record, identify the original filing by file number and date filed and state that the original statement is still effective. Upon the timely filing of a continuation statement, the filing is extended for an additional five year period after the last date the original filing and any previous continuation statements five year periods would have expired. Succeeding continuation statements may be filed at the appropriate time. The County Clerk shall physically annex the original financing statement and each succeeding continuation statement and any other related filing (amendment, assignment). AMENDMENTS- (355.9 - 402(4)) A financing statement may be amended. Additional collateral may be added by amendment. An amendment does not extend the five year filing period. An amendment must be signed by both the debtor and the secured party to be filed. The total fee for the filing of an amendment is $9.00. No legal process tax applies. ASSIGNMENTS - (355.9 - 403) A financing statement may disclose an assignment of a security interest in the collateral described in the financing statement by indication within the financing statement of the name and address of the assigned or by an assignment on the face or back of the financing statement or copy thereof at the time of filing of the original financing statement. A secured party may assign all or part of his rights under a financing statement by filing a separate written statement of assignment signed by the secured party of record and setting forth the name of the secured party of record, the debtor, the file number and the date of filing of the original financing statement plus the name and address of the assignee and a description of the collateral assigned. Assignments - Duties of filing officer - (355.9 - 403(2)) Collect the proper fee. The filing officer shall mark the document with the date and hour of filing. The filing officer shall note the assignment in the appropriate index. The filing officer shall annex the separate assignment to the original financing statement. After filing and indexing the assignment, the assignee becomes the secured party of record. The fee for filing and indexing an assignment is $8.00. If the assignment is filed subsequent to the original, the fee is $9.00 to cover the minimum cost of mailing another filing receipt to the assignee as the succeeding secured party of record. An original security agreement showing an assignment within or attached thereto would create a fee of $25.00 total:
$25.00 total fee The fee for a separate assignment filed subsequent to the original financing statement is $8.00 plus $1.00 minimum postage fee, totaling $9.00. RELEASE OF COLLATERAL - (355.9 - 406) A secured party of record may by his signed statement release all or a part of any collateral described in a filed financing statement. A release or termination shall contain the following: Fee (if required) Description of collateral being released Name and address of the debtor Name and address of the secured party of record File number A release signed by a person other than the secured party of record must be accompanied by a separate written statement of assignment together with the proper fees to be filed and processed. The fee for releasing a lien in full is included in the fee for filing the original financing statement. The fee for a partial release of the original filed financing statement is $5.00 for each such partial release. Upon presentation of such, the filing officer shall mark the statement with the hour and date of filing and shall note the filing in the appropriate index. TERMINATION STATEMENT - (355.9 - 404) Whenever a secured party no longer has an outstanding secured obligation and upon the written demand of the debtor or within fifteen days after a secured transaction has terminated, the secured party must file with each filing officer with whom the financing statement was tiled a termination statement. The termination statement must show the original file number and the date filed of the original financing statement. The filing officer shall note the termination in the index. If a filing officer has a microfilm or other photographic record of the financing statement and any annexes, he may remove it from his files upon receipt and filing of the termination statement. In any case, the filing officer may remove the original financing statement and any annexes thereto after one year after the filing of the termination statement. The uniform fee for a termination shall be included in the fee collected whenever the original financing statement was filed. FIXTURE FILINGS - (KRS355.9 - 402(5)) Timber to be cut, minerals (oil and gas) All these are regular UCC filings, but have some additional requirements: Must show that it covers this type of collateral. Must recite that it is to be filed in the same office as real estate records. The description of the real estate must be shown and the name of the record owner of the real estate must be listed. The description can be more informal than is required for deeds and mortgages. The County Clerk shall index the names of the debtors and any owners of record of the real estate listed on the UCC as mortgagors and the secured party as a mortgagee (KRS 355.9 - 403(7)). These filings may be amended or assigned like all other UCC filings. They expire after five years after the date of filing. These filings require full terminations or partial terminations, as the case may be. All fees are exactly the same as all other UCC filings. A mortgage can include items which are or can become fixtures. A fixture filing included in a mortgage document remains effective as a mortgage for the length of the mortgage. Whenever a fixture filing is included in a mortgage, the entire document is filed as and indexed as a mortgage and must pay the filing fee for mortgages and include the full legal description required by a mortgage. FILE SEARCHES (KRS355.9 - 407) Any person may request a file search. The County Clerk shall issue his certificate showing whether there is on file on the date and hour stated within, any presently effective financing statement naming a particular debtor and any assignment thereof and if there is, furnish the date and hour of filing and the names and addresses of the secured parties therein. The fee for such is $5.00 per name searched (KRS64.012). Neither the County Clerk nor any Deputy or employee shall be personally liable for any damages which may arise due to information furnished pursuant to this section which is subsequently shown to be inaccurate. |
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