Talk to an Advisor

UCC (Uniform Commercial Code)

The Uniform Commercial Code (UCC) is a comprehensive set of laws governing all commercial transactions in the United States. It is not a federal law but a uniformly adopted state law. Each state has adopted the UCC with some modifications, so it is not entirely uniform from one state to another.

In terms of the real estate investment industry, the UCC is particularly relevant in a few areas:

  1. Article 9 – Secured Transactions: This is perhaps the most significant aspect of the UCC for real estate investors. It governs the process by which security interests are perfected and enforced in personal property (not real property). While real estate itself is not governed by Article 9, many aspects of real estate financing involve personal property. For example, fixtures (personal property that is attached to real property in such a way that it becomes part of the real property) can be subject to a UCC filing. In a real estate transaction, if the personal property is used to secure a loan, the lender might file a UCC-1 financing statement to perfect a security interest in these items.
  2. Article 2 – Sales: This part of the UCC governs the sale of goods. It is generally not applicable to real estate transactions, which involve the sale of real property, not goods. However, for real estate investors dealing in the sale of manufactured homes that are considered personal property (not yet affixed to the land), the UCC could apply.
  3. Article 3 – Negotiable Instruments: Real estate transactions may involve negotiable instruments like promissory notes. The UCC sets out the framework for the creation, transfer, and enforcement of these financial instruments, which can be crucial for real estate investors when structuring deals or carrying out financing operations.
  4. Leases (Article 2A): The UCC also governs leases of personal property. Some real estate investment transactions may include leases of equipment or other personal property used in a building.

While the UCC primarily deals with personal property and not real property, its influence extends to real estate investments through the financing and personal property aspects of such transactions. Real estate investors need to understand the implications of the UCC on these areas to ensure the security of their investments and compliance with applicable laws.