Non-consensual liens
Non-consensual liens are established through statutory or common law and do not require the debtor’s consent.
Non-consensual liens are harder to discover because debtors may be unaware of them, and they're often filed outside standard UCC search locations. These liens can delay or cancel a deal, so it’s important to take them into account during due diligence.
Key categories:
- Federal tax liens: The federal tax lien is often called the “general” tax lien. This type of lien is created automatically, simply by the law, even before anything is filed, which is why it is also called a “secret” or “silent lien”, when a taxpayer fails or refuses to pay their tax after receiving notice and demand. Section 6321 of the Internal Revenue Code provides for the federal tax lien. Under this section, the general tax lien is quite comprehensive; it generally covers all of the taxpayer’s assets or rights to property to ensure payment of tax debts. Federal tax liens can be recorded at the county, state, or both levels, depending on the jurisdiction. It’s important to note that the IRS can file under a “doing business as” (DBA) name on the name listed on the taxpayer’s return, which may not be disclosed in a standard UCC search.
- State tax liens: A state tax lien arises from unpaid state taxes, such as income, payroll, or unemployment taxes, and is treated as a legal judgment or statutory lien. The IRS’s silent lien may have precedence over a state tax lien, even in the absence of a filed federal tax lien. Depending on the jurisdiction, state tax liens can be recorded at either the county or state level, or both.
- Judgment liens: A judgment lien attaches to the debtor's property without requiring their consent. Generally, these liens, when recorded with the county, will also apply to any property the debtor later acquires. Depending on the jurisdiction, these liens can also be found at the county, state, or both levels. It’s advisable to conduct litigation searches with the courts at the federal, state, and county levels, including in bankruptcy courts.
- Municipal liens: A municipal lien is a legal claim placed by a local government on real estate for unpaid property tax, special assessments, utility bills, and other related charges.
- Mechanic’s liens: A mechanic’s lien serves as a security for payment to builders, contractors, construction companies, and other related parties involved in the construction or repair of buildings. This type of lien also covers suppliers of materials and subcontractors. It’s a statutory lien and the state laws generally require notice to be provided and the lien to be recorded in the proper state or local office.
Non-consensual liens often have super priority over consensual liens—even when recorded later—making them essential to any diligence strategy.
See Uncovering the hidden liens that can affect your deal for other hidden lien types and tips on discovering them.
Priority rules all counsel should recheck
First to file or perfect (UCC §9 322)
When it comes to UCC liens, in general, perfected security interests have priority over unperfected security interests, and if more than one perfected security interest covers the same collateral, the first filed financing statement has priority. There are some exceptions, such as in the case of a security interest in digital assets perfected by control having priority over even a previously perfected financing statement. This rule governs consensual liens but falls apart if a non-consensual lien steps in, as it can take priority over a UCC lien, even one filed first.
Consensual liens require proper attachment and perfection to establish priority over other creditors.
Errors (often debtor name or collateral description issues) routinely jeopardize priority. Perfection often fails due to incomplete or inaccurate information, such as changes to the debtor name, jurisdiction mismatches, or cases where the name on a UCC filing does not match the legal name of an entity.
Tax liens can leapfrog UCC liens in specific circumstances
While the general rule is "first in time, first in right," federal tax liens can outrank previously perfected consensual liens in certain situations, particularly if the UCC lien was improperly perfected or statutory exceptions apply.
Judgment liens depend on state specific recording requirements
And may require searches beyond Secretary of State offices. You should search state, county and federal court records
Fixture filings and real property liens create a hybrid risk
Understanding where to search—county recorder vs. Secretary of State offices—is essential.
For more information, see Best practices for UCC filings and searches.
Beyond UCC: The five essential searches
UCCs alone never tell the whole story. Non-consensual liens are filed outside UCC filing offices. Debtors are also often unaware of non-consensual liens.
The five-part due diligence search is a standardized, thorough set of public record searches that provides insights into any current claims and potential credit risks recorded in public documents. It encompasses:
- UCC lien search
- Federal tax lien search
- State tax lien search
- Judgment lien search
- Bankruptcy search
When evaluating a transaction, it’s crucial to consider potential liens documented in public records. Take time to analyze the transaction specifics and explore various types of liens, refining your search approach accordingly. Collect detailed information on debtors, assets, and any previous names associated with them. Research relevant state laws to understand filing requirements and lien perfection rules. Finally, conduct comprehensive searches across relevant databases to ensure nothing is overlooked.
By pairing awareness with search strategy and best practices, firms gain the clarity and speed needed to protect client interests across increasingly complex transactions.
For more information, see Uncovering the hidden liens that can affect your deal and Best practices for conducting a complete due diligence search (and pitfalls to avoid).
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CT Corporation supports law firms with end-to-end UCC search, charting, filing, and lifecycle management solutions—including IntelliChart and UCC Hub—providing valuable insights into critical areas and decreasing your risk exposure.
