A Tank Full of Trouble

Thursday, June 09, 2016 by Elliot Schon, Esq.

In the winter of 2015, Ivan Braxton* was looking into purchasing a property located in NYC that was on the market for a little more than $11,000,000. The  building was a pre-war, walk-up with 24 units and had an old oil heating system. The current owner was a notorious skinflint and had a history of running apartments into the ground.

Ivan asked Riverside to perform a search on the building to see what type of outstanding issues were present. Our search turned up outstanding mortgages in the amount of $3,076.990, numerous ECB violations totaling $127,000, a tax lien from the city of New York for $14,721 and a UCC from Empire State Oil* for $9,100, for an unpaid heating oil bill.You may be familiar with mortgages and tax liens but you may not have heard of a UCC, and neither had Ivan.

“What is a UCC and how can an oil company place a lien on the building?”, he asked.

What Are UCC’s?

Let’s take a moment to discuss what exactly UCC’s are. Many commercial transactions take place across state lines. For example, a business in New York buys something from a business in New Jersey. Now, if there was a dispute regarding the transaction and if all states had different transaction laws it would be difficult for the courts to decide the law, as each party is governed by different state laws.

To avoid this confusion the Uniform Commercial Code (UCC), was created. First published in 1952, it is one of a number of uniform acts that have been created with the goal of harmonizing the law of sales and other commercial transactions across the United States of America through UCC adoption by all 50 states, the District of Columbia, and the U.S. territories.

UCC statutes are divided into 9 major categories and cover things like sales, leases and fund transfers. Having uniform rules makes it easier to settle disputes that arise from transactions that cross state borders.






General Provisions

Definitions, rules of interpretation



Sales of goods



Leases of goods


Negotiable Instruments

Promissory notes and drafts (commercial paper)


Bank Deposits and Collections

Banks and banking, check collection process


Funds Transfers

Transfers of money between banks


Letters of Credit

Transactions involving letters of credit


Bulk Transfers and Bulk Sales

Auctions and liquidations of assets


Warehouse Receipts, Bills of Lading and Other Documents of Title

Storage and bailment of goods


Investment Securities

Securities and financial assets


Secured Transactions

Transactions secured by security interests

For real estate purposes the most important UCC Article is 9, which allows for liens to be placed on property fixtures and non-real property. A common example of a filed UCC, would be from a mortgage lender, that can include the furnishings and fixtures of a building, in their lien against a property.

In this case Empire State Oil had utilized UCC Article 9 to  to record a lien against the property, to collect on the outstanding $9,100 oil bill.  In order to clear that lien, Riverside required that the seller provide a payoff letter or proof of payment in full,  with an undertaking to send us a UCC-3 Termination, that verifies that Empire State Oil no longer has a lien on the property, and is filed to clear it of record.

Ivan was amazed to learn that  a company with no real claim to the property, was able to record a lien against the building.

Ivan decided to go ahead and purchase the building and Riverside requested payoffs and affidavits from the seller for all the outstanding issues.

As a side note, Riverside’s sharp eyed staff noticed that the payoff letter that was received was specific to that lien, and did not include language that Empire State Oil would undertake to file a UCC-3.

Since our staff did not receive the UCC-3 Termination they suspected that the seller had other outstanding bills with Empire State Oil. Riverside requested a more encompassing payoff letter that included language that there are no outstanding amounts owed, and that they undertake to file a UCC-3.

After Riverside persisted, the seller confirmed  that there were indeed other outstanding oil bills, which was the reason  they did not send us the UCC-3 termination needed to clear the lien from the property. Due to this request, they added the additional outstanding oil bills to the payoff letter, thereby clearing the way for a clean record for our Client.Investors need to understand that liens can be leveled on real property for things that aren't complete relevant to actually real property, and it takes a savvy title agency to read between the lines and ensure that all issues have been cleared.

*Names and details have been changed

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