UCC Search for secured creditors/lessors recommended prior to issuance of landlord abandonment notices
By Catherine Schlomann Robertson
Pahl & McCay
160 West Santa Clara Street, 14th Floor
San Jose, California 95113
408/286-5100 (phone); 408/286-5722 (fax)
Please understand that the information discussed in this Article is general in nature and is not intended to be legal advice. It is intended to assist owners and managers in understanding this issue area, but it may not apply to the specific fact circumstances or business situations of all owners and managers. You may need to consult applicable state and local laws. For specific legal advice, consult your attorney.
Under Civil Code Section 1983 where personal property remains on the premises after a tenancy has terminated and the premises have been vacated by the tenant, the Landlord shall give written notice to the tenant and to any other person Landlord reasonably believes to be owner of the property.
Under Civil Code Section 1983, the Notice shall describe the property in a manner reasonably adequate to permit the owner of the property to identify it. The notice may describe all or a portion of the property, but the limitation of liability provided by section 1989 does not protect a Landlord from any liability arising from the disposition of property not described in the notice except that a trunk, valise, box, or other container which is locked, fastened, or tied in a manner which deters immediate access to its content may be described as such without describing its contents. The notice shall advise the person to be notified that reasonable cost of storage may be charged before the property is returned, where the property may be claimed, and the date before which the claim must be made, the date specified in the notice shall be a date not less than 15 days after the notice is personally delivered or, if mailed, not less than 18 days after the notice is deposited in the mail. The Notice shall be personally delivered to the person to be notified or sent by first class mail, postage pre-paid, to the person to be notified at his last known address and, if there is reason to believe that the Notice sent to that address will not be received by that person, also to any other address, if any, known to the Landlord, where such person may be reasonably expected1to receive the Notice. If the Notice is sent by mail to the former tenant, one copy shall be sent to the premises vacated by such tenant.
Civil Code Sections 1984 and 1985 provide the specification of the form for the Notices to Former Tenant and Owner. However, under the Law Revision Commission comments it states that "it should be noted, however, that the title taken at a sale of property under Section 1988 is subject to any lien or right preserved by other provision of the law." (11 Cal. L. Rev. Comm. Reports 963 (1973)). This comment indicates the difficulty of Civil Code Sections 1983 and 1984 relationship with Commercial Code Section 9315(a), which provides:
(1) A security interest or agricultural lien continues in collateral notwithstanding sale, lease, license, exchange, or other disposition thereof, unless the secured party authorized the disposition free of the security interest or agricultural lien.
(2) A security interest attaches to any identified proceeds of collateral.
Therefore, prior to sending out a notice under Civil Code Section 1984, a UCC search should be undertaken in state of incorporation to determine whether or not ownership interest or a security interest applies to the property proposed to be sold. Failure to conduct such a search may result in the security interest maintaining its position on the sold property, and the creation of liability on behalf of the seller and a cause of action for conversion against the buyer.
If all actual or potential secured creditors are noticed with the required 1984 and 1985 Notices, and those parties fail to demand repossession, the landlord may then sell the property pursuant to Civil Code Section 1988 (or retain possession if it is worth less than $300) and “the landlord is not liable . . . to any person to whom notice was given”, under Civil Code Section 1989.
1. Under Civil Code Section 1980(d), the term “reasonable belief” means the actual knowledge or belief a prudent person would have without making an investigation (including any investigation of public records) except that, where the Landlord has specific information indicating that such an investigation would more probably than not reveal pertinent information and the cost of such an investigation would be reasonable.
After receiving her a B.S. in Finance and her J.D. from the University of San Francisco in 1988, Catherine Robertson has provided collection, bankruptcy and pre-judgment remedy solutions for the clients of Pahl & McCay. She is a partner at Pahl & McCay, and has been rated A-V (highest professional and ethical rating) by Martindale-Hubbell. Should you require expertise or assistance in collecting an outstanding obligation, please consider Pahl & McCay.