Security interest perfected before July 1, 2001.
(a) A security interest that is enforceable immediately before July 1, 2001, and would have priority over the rights of a person that becomes a lien creditor at that time is a perfected security interest under this article if, on July 1, 2001, the applicable requirements for enforceability and perfection under this article are satisfied without further action.
(b) Except as otherwise provided in section 9-705, if, immediately before July 1, 2001, a security interest is enforceable and would have priority over the rights of a person that becomes a lien creditor at that time, but the applicable requirements for enforceability or perfection under this article are not satisfied on July 1, 2001, the security interest:
(1) is a perfected security interest for one year after July 1, 2001;
(2) remains enforceable thereafter only if the security interest becomes enforceable under section 9-203 before the year expires; and
(3) remains perfected thereafter only if the applicable requirements for perfection under this article are satisfied before the year expires.
Source:Laws 1999, LB 550, § 206.
1. Perfected Security Interests Under Former Article 9 and This Article. This section deals with security interests that are perfected (i.e., that are enforceable and have priority over the rights of a lien creditor) under former article 9 or other applicable law immediately before this article takes effect. Subsection (a) provides, not surprisingly, that if the security interest would be a perfected security interest under this article (i.e., if the transaction satisfies this article's requirements for enforceability (attachment) and perfection), no further action need be taken for the security interest to be a perfected security interest.
2. Security Interests Enforceable and Perfected Under Former Article 9 but Unenforceable or Unperfected Under This Article. Subsection (b) deals with security interests that are enforceable and perfected under former article 9 or other applicable law immediately before July 1, 2001, but do not satisfy the requirements for enforceability (attachment) or perfection under this article. Except as otherwise provided in section 9-705, these security interests are perfected security interests for one year after July 1, 2001. If the security interest satisfies the requirements for attachment and perfection within that period, the security interest remains perfected thereafter. If the security interest satisfies only the requirements for attachment within that period, the security interest becomes unperfected at the end of the one-year period.
Example 1: A pre-July 1, 2001, security agreement in a consumer transaction covers "all securities accounts". The security interest is properly perfected. The collateral description was adequate under former article 9 (see former section 9-115(3)) but is insufficient under this article (see section 9-108(e)(2)). Unless the debtor authenticates a new security agreement describing the collateral other than by "type" (or section 9-203(b)(3) otherwise is satisfied) within the one-year period following July 1, 2001, the security interest becomes unenforceable at the end of that period.
Other examples under former article 9 or other applicable law that may be effective as attachment or enforceability steps but may be ineffective under this article include an oral agreement to sell a payment intangible or possession by virtue of a notification to a bailee under former section 9-305. Neither the oral agreement nor the notification would satisfy the revised section 9-203 requirements for attachment.
Example 2: A pre-July 1, 2001, possessory security interest in instruments is perfected by a bailee's receipt of notification under former section 9-305. The bailee has not, however, acknowledged that it holds for the secured party's benefit under revised section 9-313. Unless the bailee authenticates a record acknowledging that it holds for the secured party (or another appropriate perfection step is taken) within the one-year period following July 1, 2001, the security interest becomes unperfected at the end of that period.
3. Interpretation of Pre-July 1, 2001, Security Agreements. Section 9-102 defines "security agreement" as "an agreement that creates or provides for a security interest". Under section 1-201(3), an "agreement" is a "bargain of the parties in fact". If parties to a pre-July 1, 2001, security agreement describe the collateral by using a term defined in former article 9 in one way and defined in this article in another way, in most cases it should be presumed that the bargain of the parties contemplated the meaning of the term under former article 9.
Example 3: A pre-July 1, 2001, security agreement covers "all accounts" of a debtor. As defined under former article 9, an "account" did not include a right to payment for lottery winnings. These rights to payment are "accounts" under this article, however. The agreement of the parties presumptively created a security interest in "accounts" as defined in former article 9. A different result might be appropriate, for example, if the security agreement explicitly contemplated future changes in the article 9 definitions of types of collateral — e.g., "'Accounts' means 'accounts' as defined in the UCC article 9 of (State X), as that definition may be amended from time to time". Whether a different approach is appropriate in any given case depends on the bargain of the parties, as determined by applying ordinary principles of contract construction.