Also known as: perfecting security interests · perfected security interest · perfected security interests · perfection · UCC Article 9 perfection
Written by attorneys · grounded in primary & secondary sources — see below
A process by which a secured party establishes priority in collateral against third parties by filing a financing statement or taking possession of the collateral.
Platinum Partners transfers an obligation secured by a mortgage to Prosperity Investments as collateral for a separate loan. Prosperity Investments files a financing statement describing the obligation. The filing perfects Prosperity Investments' security interest and prevents the obligation from becoming unsecured in the hands of the transferee.
Paul Peterson grants a security interest in shares of stock to Phoenix Technologies to secure a debt. Phoenix Technologies takes physical possession of the stock certificates. The possession perfects the security interest in the instrument and gives Phoenix Technologies priority over later claimants who never obtain possession.
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A transferee receiving an obligation secured by a mortgage as collateral for another debt must perfect under UCC Article 9 to protect its interest. The principles of mortgage transfer keep the obligation and mortgage together unless the parties agree otherwise. Filing a financing statement achieves that protection.
A security interest in an instrument is perfected by the secured party taking possession of the instrument. Without possession the interest remains unperfected even if a security agreement exists and value has been given. Later parties who obtain possession prevail over the unperfected interest.
Separation renders the note unsecured as a practical matter. The mortgage loses efficacy because enforcement rights no longer travel with the obligation. Courts therefore presume the parties intend to keep the two rights together unless clear evidence shows otherwise.
…upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.” Model UCC §9-310 (1979 pamphlet). The Tax Lien Act of 1966 extends similar protection to repairmen: “Even…