Securing Free and Clear Title on Every Transaction

I love the movies. The last movie I saw in the theaters was “Free Guy”, Ryan Reynolds latest blockbuster. It’s all about an NPC (Non-Playable Character) in an online game realizing his freedom and capitalizing on it. Everyone likes freedom. Americans celebrate it daily (or try). But most machine shops buying used machines (and many used dealers) don’t realize the machines they are buying may very well NOT be free to travel over state lines. These machines may have “Liens and Encumbrances” placed upon them by banks, new dealerships, or other companies. We work to relieve these legal encumbrances on every transaction we handle.

As a part of our process, we make every effort to ensure that the machines we sell have free and clear title. As many people know from buying cars or houses, if you finance a purchase, the bank or lending institution that finances it holds the asset purchased as collateral against the loan until it has been paid off. This is true of machines in the same way it is true for houses and cars. Trust us when we say – Banks take these very seriously.

The below process and efforts are something our company performs on a daily basis. It is important to buy through a company that takes this seriously and performs it thoroughly.

First – the differences between clearing title on a machine purchase as opposed to a house or a car:

• With machines there is no formal deed that exchanges hands (as happens with homes or cars)
• Notary Publics are not required to certify the transferring of “Title” or the “release” from liens on a machine purchase
• “Title” transfers when a new buyer pays for said machine and is generally declared by Purchase Order and funding of the transaction

Scenarios when a lien is present and how they are released:

1. Specific Liens – a lien that is tied to a specific piece of machinery
   1. If money is still owed on a machine there is typically a specific lien and a payoff can be requested for this lien. Once payment has been made, and receipt of funds by the bank is confirmed, a Uniform Commercial Code 3 (UCC3) “Termination” is filed and this officially ends the lending institution’s interest in the item and machine is considered “Free and Clear”.
   2. If a machine has been paid off but it is less than five years from the time the loan was started, there can be a specific lien still lingering in the public filings but it can be easily terminated as it is no longer relevant. Banks sometimes just let the UCC filings expire rather than terminating them. Either way, we secure this release.
   3. Sometimes there can be a multi-machine purchase with one UCC filing against it. When this occurs and only one machine is being sold, a partial payoff can be generated and a UCC partial release can be generated once the payment has been made.
2. Blanket Liens – an all-asset lien typically tied to a line of credit or to a large loan which required the provision of company asset accounting in order to be secured.
   1. The most common situation is that one piece of machinery can be released off of collateral without much trouble. A letter stating that the machine is released or a UCC partial release deleting that one specific machine from collateral can be secured
   2. If money is currently owed on an all asset lien, sometimes the bank or lending institution may require some amount of the funds to be sent to pay down the line of credit in order to release the machine. In this scenario, a partial release or letter is secured in order to specify this transaction.
3. Tax Liens – liens against an organization due to federal or state taxes being unpaid. This is an unusual circumstance that is not typically seen.

The above information is basic and only begins to shed light on the efforts that take place on each transaction we perform. We do this work on individual machine sales, plant liquidations or auctions. Whether you decide to work with us, or with another qualified machinery dealer, we encourage you to inquire if this process has been, or will be, performed. It protects you. It protects the seller. It’s good business.

Example of a UCC Filing