Perfecting A Security Interest In Collateral
What is a Security Interest In Collateral?
A security interest in collateral is “perfected” by filing a UCC 1 Financing Statement. See California Commercial Code Section 9310. Section 9515(a) of the Commercial Code provides that a Financing Statement is effective for a period of five (5) years after the date it is filed. The effectiveness of a filed Financing Statement lapses on the expiration of the five (5) year period unless before the lapse a Continuation Statement is filed, which will act to renew the effectiveness of the Financing Statement for an additional five (5) year period.
Using this method, the effectiveness of the Financing Statement can be renewed indefinitely. Upon lapse, a Financing Statement ceases to be effective and any security interest that was perfected by filing the Financing Statement becomes unperfected. California Commercial Code Section 9515 ( c). If a security interest becomes unperfected upon lapse, it is deemed never to have been perfected as against a purchaser of the collateral ID.