What a dirt lawyer needs to know about new Article 9 of the UCC

1. a certificated security in bearer form if the certificated security is delivered to the purchaser;

2. a certificated security in registered form, if the certificated security is delivered to the purchaser, and is either indorsed to the purchaser or in blank by an effective indorsement, or registered in the purchaser's name upon its initial issuance or registration of transfer by the issuer; and

3. an uncertificated security if either it is delivered to the purchaser or the issuer agreed in writing to follow the written instructions of the purchaser without further consent by the registered owner.

Priority. The priority rules do not always depend on the order of perfection of the security interest. Examples of such rules are as follows:

interest perfected by control primes a security interest perfected by any method other than control, even if the secured party who takes control perfects at a later time and with knowledge of the earlier security interest that was perfected by filing or another method. As between secured parties who perfect by control, the first to obtain control has priority.89

(c) "A security interest in a certificated security in registered form which is perfected by taking delivery under Section 9-313(a) and not by control under Section 9-314 has priority over a conflicting security interest perfected by a method other than control" (such as by filing).90

For certificated securities, a buyer other than a secured party takes free of a security interest if the buyer gives value and receives delivery of the collateral without knowledge of the security interest and before it is perfected.91 For uncertificated securities, a buyer other than a secured party takes free of a security interest if the buyer gives value without knowledge of the security interest and before it is perfected.92

Rights to Distributions. Rights to receive distributions or dividends are often pledged together with pledges of constituent membership interests in limited liability companies, partnership interests in partnerships, or shares of stock. In those cases, the rights to receive such distributions or dividends should be classified as proceeds of the underlying investment property or general intangible collateral, and may be described as such in the applicable security agreement.93 A security interest in such proceeds attaches and is perfected automatically, as discussed below.94

D. General Intangibles

minerals before extraction."95 It is a catch-all definition. The real estate practitioner most commonly sees general intangibles such as interests in contractual rights, permits and authorizations, and security interests created by pledges of entity interests that are not securities under the terms of their formation documents or otherwise.96 As discussed below, Article 9 now has a separate definition for a particular type of general intangible, a payment intangible, which includes such items as a participation interest in a loan or a loan agreement without a promissory note.97