Most of us are familiar with the term “mortgage.”
It is, of course, a pledge of land and buildings for the payment of a debt.
You may not have heard of a mortgage on personal property. By “personal property” I mean everything in the world except land and buildings.
That’s not a legal definition, but it will do for now.
So, who needs to know anything about mortgages on personal property?
Anybody in business, anybody who has any responsibility for business financing and anybody working for a bank or a lender to business.
The subject of personal property mortgages is covered by a statute known as the Uniform Commercial Code. It is “uniform” because it has been adopted pretty much the same in every state.
The problem with our form of government is that many subjects cannot be treated by the Congress, because the Constitution leaves many subjects to the states to regulate. Criminal law is an example; so is the law of divorce.
So is the law of mortgages.
In order to try to get some uniformity on the subject, representatives from business met in the early 1950s together with many law school professors, including one of my own, and then took the results back to their respective legislatures for adoption.
Through the years, the UCC has been amended many times. It is a complicated and lengthy statute. I will try to keep it simple.
In order to have a personal property mortgage, you first need something called a “security agreement.” Banks generally have you sign an agreement that they can place a claim on personal property.
The mortgage itself is called a “financing statement.” It must provide the name of the debtor, the name of the lender and a description of the collateral. A general description is permitted, such as “farm and other equipment,” which was held sufficient to be a mortgage on the tractor.
To be effective as a mortgage, the financing statement must be filed in Harrisburg.
This is unfortunate, because there is no local reference in Cambria County. It used to be filed in the local courthouse, but the state wanted the filing fees, so they moved it to Harrisburg some years ago.
Remember, however, it is a claim on the property described. If you buy that property without dealing with the lender, you buy it subject to the claim, which means subject to the amount of the debt.
If you’re not sure how to check for mortgages on personal property you want to buy, contact your attorney. If you go online, check for the past five years, because financing statements expire after five years.
Good luck.
Thomas Young, a graduate of Pitt and Harvard Law School, has been a lawyer in Johnstown since 1958. He is a former professor of business law at Pitt-Johnstown. Readers may send questions to Young in care of The Tribune-Democrat. The opinions expressed in this column are general in nature and may not apply to your situation. Consult your attorney for advice on specific legal matters.
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