The action taken by a secured party under Article 9 of the Uniform Commercial Code to give public notice of its security interest in personal property and to prioritize such security interest over the claims of certain other parties who acquire an interest in such property.
A perfected lien is one in which the creditor has secured the proper documentation necessary to make the lien valid. For example, a mortgage is perfected by recording a Deed of Trust with the county recorder, a lien on personal property is perfected by filing a financing statement with the Secretary of State. An unperfected lien can be avoided by the bankruptcy court.
This occurs when a security interest (collateral) is protected by taking possession or possibly registering through the appropriate agency.
When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. A deed of trust is perfected upon execution and delivery of the Deed to the Buyer; filing a financing statement with the secretary of state perfects a lien in personal property. An unperfected lien is valid between the debtor and the secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. The trustee can avoid an unperfected lien.
The proper recording or filing of an instrument, thereby giving notice to the world; usually applied to the perfecting of a security interest under the Uniform Commercial Code.
the act by which a secured creditor has taken all required and appropriate legal steps to perfect its lien (The lien is legally sufficient).
When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. A mortgage is perfected by recording it with the county recorder; a lien in personal property is perfected by filing a financing statement with the secretary of state. An unperfected lien is valid between the debtor and the secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. An unperfected lien can be avoided by the trustee.
In law, perfection relates to the additional steps required to be taken in relation to a security interest in order to make it effective against third parties and/or to retain its effectiveness in the event that the party granting the security interest goes into bankruptcy. Generally speaking, once a security interest is effectively created, it gives the relevant rights to the holder of the security as against the person who grants the security.Mace Builders v Lunn [1987] Ch 191 However, in many legal systems, additional steps ("perfection") are required to enforce the security against other third parties, such as a liquidator.For example, section 395 of the Companies Act 1986 of the United Kingdom requires certain security interests to be filed at Companies House within 21 days of being created. A failure to make such a filing does not affect the validity of the security interest between the debtor and the secured party, but if the debtor goes into insolvent liquidation, the security interest is void against the liquidator.