Kentucky law indicates that a mortgage must contain a preparation clause signed by an attorney. The requirement for an attorney to sign the preparation clause cannot be satisfied by having a bank employee or other loan officer sign the preparation clause. Read the rest of this entry »
Preparation Clauses in Kentucky Mortgages
March 10th, 2010Judgment Liens in Kentucky
March 8th, 2010In some states, such as Indiana, a judgment automatically becomes a lien upon real property located in the county in which the judgment was obtained. In these states, if a judgment is obtained in one county, and real property is located in another county, then the bank must docket the judgment in the county in which the real property is located in order to obtain a lien upon the land. Read the rest of this entry »
Grain is Not Inventory
March 5th, 2010In a commercial loan setting, bankers are used to thinking of the raw materials, work in process, and products held by people for sale or lease as inventory. The Uniform Commercial Code in section 26-1-9.1-102 specifically codifies this perception.
There is, however, an important exception to this designation. If your borrower is a farmer, grain and seed will not be included in the definition of inventory. This is because the definition of inventory specifically excludes farm products. The term “farm products” is defined as not only crops growing in the field, but also, without limitation, crops grown or to be grown and supplies used or produced in a farming operation.
Although revised Article 9 has simplified the process of taking a security interest in agricultural products, these liens do still differ in application from liens on ordinary equipment and inventory.
Author: Andrew C. Ozete (bio)
Phone: 812.452.3582
email: aozete@bamberger.com
Location of Filing Financing Statements for Registered Organization
March 3rd, 2010Revised Article 9 makes it clear that financing statements are to be filed at the “location” of the debtor. A debtor’s “location” is dependent upon the type of debtor. One type of debtor is entities that are registered organizations under the laws of a particular state. Examples of registered organizations are corporations, limited liability companies, limited liability partnerships, limited liability limited partnerships, and limited partnerships. Generally speaking, partnerships do not have to register with states in order to be formed and therefore are not registered organizations under Revised Article 9. Read the rest of this entry »
Insured Closing Letters
March 1st, 2010An insured closing letter is issued in connection with real estate closings. The letter may be addressed to any of the parties to the real estate closing (i.e. a seller, purchaser, landlord, tenant, lender or current lienholder). The letter outlines the closing agent’s liability for losses arising from failure of the closing agent to comply with written closing instructions or from fraud, dishonesty or negligence of the closing agent in handling funds or documents in connection with a real estate closing. Read the rest of this entry »
Adequacy of Collateral Descriptions
February 26th, 2010Under current and prior versions of Article 9, the adequacy of the description of collateral has been a highly litigated issue. Generally speaking, the description in the security agreement must be specific enough to allow the collateral to be clearly identified from that description. The description in a financing statement can be somewhat more general as it is intended only to place parties on notice of the need to make a contact with the secured creditor to determine the precise extent of the security interest. As Courts have interpreted these various rules, conflicting results have occurred in various jurisdictions. Read the rest of this entry »
What is a Negative Pledge?
February 24th, 2010A negative pledge is really not a pledge at all. A negative pledge is a promise by a borrower to not allow any liens to be placed upon some or all of the borrower’s assets. Negative pledge language is often found in standard bank loan agreements as one of many covenants (promises) made by the borrower. As with other covenants in the loan agreement, violation of a negative pledge is usually an event of default. A negative pledge can also be a stand alone document. Frequently stand alone documents are for negative pledges of real estate assets and are in a form that allows recording in the real estate records of the county in which the subject real estate is located. Read the rest of this entry »
Quick Perfection of Purchase Money Security Interest
February 22nd, 2010A purchase money security interest transaction is virtually never susceptible to bankruptcy preference attack. An exception to this is where the bank has not perfected the security interest on or before twenty days after the debtor receives possession of the property constituting the collateral. Read the rest of this entry »
Borrower Found to Have Filed Bankruptcy in Bad Faith
February 19th, 2010In a New York case, a borrower was found to have filed a Chapter 11 bankruptcy in bad faith in order to avoid a foreclosure action filed by the lender. In this case, the borrower owned an apartment building and had been sued by the lender for nonpayment. Read the rest of this entry »
Rights of Depository Bank
February 17th, 2010When Revised Article 9 of the Uniform Commercial Code became effective in most states, it included within its scope deposit accounts. To create a security interest in deposit accounts, a lender must establish control. Read the rest of this entry »