The Uniform Commercial Code (UCC) was first published in 1952 as a Uniform Act to sync laws related to sales and other commercial transactions within territory controlled by the United States. Article 9 of the UCC governs transactions that involve one party taking a security interest in another’s personal property. More specifically movable or intangible property and fixtures. However, even with established standards, there is sometimes confusion related to fixtures filings.
Fixtures, defined as an item or attachment that is permanently fixed to real property, can include anything ranging from specialized lamps in a restaurant to solar panels on leased ground. Even though these items are the same classification of collateral, UCC law may vary. The second example of solar panels may qualify as a transmitting utility. Transmitting utilities are defined as either a person or business that operates a business that transmits goods and services by pipelines, electricity, rail, and other means. Common industries could include gas, water, power, transportation, and even communications.
Filing as a transmitting utility, depending upon the state, can be completed by checking the far right box in section 6a of the standard CC1 Initial Filing Statement. This type of filing allows two particular advantages over the standard procedure. The first, rather than filing a fixture filing at each county, a single filing can be made at the state level for qualified transactions. Secondly, a transmitting utility filing does not expire until the UCC is terminated. As one could imagine, this would help reduce the cumbersome nature of filing initial statements and continuations for lenders of large utility-like customers. But the application of this law can be used for smaller institutions as well.
Although expensive and time-consuming, more communities are being wired for fiber optic technology than in past years. Some of these contracts are even in small towns where large providers are apprehensive about moving. This may provide financing opportunities for small to medium size financial institutions in the years to come. Whatever the business may be, the point remains that if the business involves the transmission of power, steam, gas, oil, water, or even information collateralized by a fixture (IE: fiber optic cable), a consideration of the transmitting utility filing option may be warranted.
While researching the topic, there was limited case law on the subject matter for presentation. However, among a few sources, it appears that the best practice to ensure coverage may be to make both types of filings.