New Requirements for UCC Financing Statements Filed in New Jersey
In an effort to provide remedies for certain fraudulent financing transactions, the New Jersey Legislature recently revised the requirements for completion of Uniform Commercial Code (UCC) financing statements under Assembly Bill No. 2481, which was signed into law effective May 11, 2015. In order for financing statements to be effective in New Jersey under N.J.S.A. 12A:9-502, the following new requirements must be satisfied:
- the financing statement must provide the name of the secured party or the name of a representative of the secured party, which discloses the identity of the secured party or representative (12A:9-502(a)(2)) and
- the financing statement must indicate the collateral covered by the financing statement and that the collateral is within the scope of this chapter, pursuant to 12A:9-102 and 12A:9-109 (12A:9-502(a)(3)).
While the first part of each of the above requirements are restatements of past requirements, the underlined language is new and must be addressed to ensure that any financing statement filed in New Jersey is effective. If the requirements are not satisfied, the filing office can reject the financing statement for filing under N.J.S.A. 12A:9-516(b). Even if the filing office accepts the financing statement for filing, the failure to comply with the new requirements could render the financing statement ineffective and thereby unenforceable.
The first requirement relating to the name of the secured party or its representative should pose little risk for secured parties since most secured parties file under their actual legal name. To the extent a secured party files under its trade name, however, it is unclear whether that would be sufficient under the new requirement especially if the trade name is not registered in New Jersey since it arguably does not identify the secured party or representative.
The second requirement relating to the collateral covered by the financing statement requires the insertion of new language within the collateral description on the face of the financing statement. Language that states, “This collateral is within the scope of the New Jersey Uniform Commercial Code, pursuant to §12A:9-102 and §12A:9-109” or some variation thereof (provided the statute references are included) must now be incorporated into the financing statement. This new language applies to financing statements filed at the Secretary of State level as well as to fixture filings filed at the local county level. In connection with transactions secured by a mortgage and to the extent a mortgage is filed as a financing statement in the county real estate records, the mortgage should also include this language within the description of the mortgaged property as well as on the face of the mortgage.
In addition to the new requirements relating to the sufficiency of financing statements, the New Jersey Administrative Code was amended to require the electronic filing of all financing statements effective July 1, 2015. N.J. Admin. Code § 17:33-2.9. This amendment makes New Jersey the second state to mandate electronic filing of all UCC records.
Under the new e-filing rule, the filing date assigned to an electronically submitted financing statement will be the “work day” when the Division of Revenue and Enterprise Service’s (DORES) computer system analyzes the financing statement transmission for compliance with the filing requirements. N.J. Admin. Code § 17:33-2.4(a)(4). If the financing statement is transmitted outside of office hours or when the filing office is closed, the filing date could be as late as the close of business on the next work day.
Secured parties should review their procedures to ensure that they comply with the new secured party name, collateral indication and e-filing requirements. Compliance with the new financing statement requirements should not be difficult as long as the secured party:
- uses the legal name provided for the secured party or its representative to identify the actual party,
- includes a statement in the collateral description section on the face of the financing statement that the collateral is within the scope of the New Jersey Uniform Commercial Code, pursuant to §12A:9-102 and §12A:9-109,
- has a system in place or service provider to e-file with DORES, and
- files promptly, because records may receive a later filing date than anticipated.