Ch.10: Personal Property

**Personal Property Documents**

**Documents used to transfer ownership and create security interests in personal property are different from those used in transactions involving just real estate. A Bill of Sale must be prepared to provide evidence of a transfer of ownership. A Security Agreement is used to create a lien on the personal property to secure payment of any unpaid portion of the purchase price or some other debt, which will be evidenced on a promissory note, or in some cases, a real estate contract. A Personal Property Security Agreement must also be perfected by filing a Financing Statement or a Vehicle Certificate of Ownership Application.**

**Ordinary Personal Property**

**For more items of tangible personal property, other than fixtures, motor vehicles and mobile homes, the forms required to perfect or release a security interest are set forth in the Uniform Commercial Code "UCC". A Security Interest in ordinary tangible personal property is perfected by filing a UCC Financing Statement with the Department of Licensing. The filing will continue to be effective for 5 years. An existing security interest in this type of property may be terminated, released, assigned, amended or continued beyond the original 5 year period by filing a UCC Financing Statement Amendment. If inaccuracy is found in a previously filed UCC Financing Statement Amendment, it can be corrected by a Information Statement. Can obtain a statement of financing statements filed under the debtor's name, a personal property title search of sorts, by sending an Information Request to the Department of Licensing. If the parties agreement requires that a personal property security interest must be cleared, assigned or changed, prepare a UCC financing amendment or a release of interest and an application for certificate of title, as appropriate. Note: A UCC Financing Statement is neither necessary nor effective to perfect a security interest in a motor vehicle or mobile home. Accordingly a Financing Statement Amendment may not be used to modify or terminate a perfected security interest in a motor vehicle or mobile home. The forms published by the Department of Licensing must be used in transactions involving motor vehicles or mobile homes.**

**Promissory Note**

**If any part of the purchase price remains unpaid, or if the personal property will be used as collateral security for payment of some other debt, a Promissory Note must be prepared to provide evidence of the debt. In real estate transactions, items of personal property are often simply "included in the purchase price." In those cases, the promissory note or real estate contract secured by the land includes the balance owing on the personal property as well, and an additional promissory note is not required, although you must still prepare a security agreement.**

**Security Agreement**

**creates a lien on personal property, called "security interest", to secure payment of a debt. The parties are called the "secured party" and the "debtor." Security Agreement will not be recorded. Instead, the security interest created by the agreement must be "perfected" by filing or recording an additional document to give "constructive notice" that a security interest exists. The documents required to perfect security interests vary, depending on the type of personal property involved in the transaction. Whenever preparing a security agreement for personal property, you must also prepare a financing statement or application for certificate of title, depending on the type of property If more than one type of personal property is included in a single security agreement, you must prepare the documents required to perfect the security interest for each item of personal property, which will be filed in different places depending on the types of property involved in the transaction.**

**Personal Property**

**includes things that are not permanently attached to the land and certain interests in real estate that will last less than a lifetime. Tangible items such as airplanes, underwear and sandwiches are personal property, as are certain legal rights that can't be seen, felt, or smelled, called intangibles, such as a tenants rights under a lease or a share of stock in a corporation. Fixtures are mixed, part of personal property and part real property. If any personal property appears on the exam, do not ignore it! Carefully read and follow instructions and prepare whatever personal property documents may be required, even if you think the stuff is valueless.**

**Bill of Sale**

**is used to provide evidence of the transfer of ownership of personal property. Bill of Sales are not recorded unless the property includes fixtures, mineral, or standing timber, on land which is legally described.**

Motor Vehicles and Mobile Homes

A security interest in a motor vehicle and mobile home will be perfected by obtaining a Certificate of Title, issued by the Department of Licensing, showing the owner as the Registered Owner and the secured party as the Legal Owner. To change the name of the owner on title certificate or to add a new lien holder, you must prepare a Vehicle Certificate of Ownership Application showing the name and address of the new registered legal owners and take it, together with a Bill of Sale and a copy of the Security Agreement, Real Estate Contract, or Deed of Trust used to create the security interest, to a vehicle licensing agency. The Department of Licensing will process the application, then issue a new certificate of ownership and vehicle registration.

Fixtures, Standing Timber, and Minerals

A security interest in fixtures, standing timber, or minerals is perfected by filing a UCC Financing Statement and a UCC Amendment with the auditor of the county where property is located. Filing will continue to be effective for 5 years. Since the required forms published by the Department of Licensing do not meet the requirements for recording of real estate documents, a cover sheet should be included.

Real Estate Excise Tax (Taxes on mobile home transfers)

All transfers of mobile homes will be subject to the real estate excise tax, the use tax or the retail sales tax. If the transaction includes land on which a mobile home is situated, you must prepare separate real estate excise tax affidavits for the land and the mobile home. If required, you may include the mobile home description as part of the legal description on the real property documents, as follows: "TOGETHER WITH one 2003 'Voyager' mobile home, 40 feet long, 16 feet wide, manufacturer's serial number 1234567, permanently situated thereon." The real estate excise tax applies if all of the following conditions are met: 1) the mobile home has been subject to retail sales or use tax during a previous sale 2) it is affixed to land by a foundation, such as posts or blocks, and has connections for utilities 3) the unit is not required to be removed from the land as a condition of sale

Mobile Home Title Elimination

The owner of a permanently situated mobile home may eliminate the title, thereby making the mobile home a permanent part of the real property. After the title has been eliminated, the owner may elect to move the manufactured home to another site, where it will again become part of the real property, or to change the mobile home's status back to personal property by obtaining a new title certificate. A Manufactures Home Application, is used for these transactions. Fill out the form, attached the legal description of the property, obtain necessary signatures, and record the form with the county auditor. After recording, take the title certificate, proof of payment of taxes and recording fees, and the recorded form or a certified copy to a vehicle licensing agency for processing. The Department of Licensing will then send a notice of approval of the application, or a new title certificate.

Use Tax

The use tax is a tax upon the use of tangible personal property, and applies to a purchaser or lessee who acquires the property without paying the retail sales tax. For most personal property sale transaction, you must prepare a Consumer Use Tax Return and send it, with the tax payment, to the Department of Revenue. For sales of motor vehicles and mobile homes, the certificate of ownership application also serves as the use tax return. The use tax on the transfer must be paid before a new certificate of title will be issued. The tax rate is the same as the retail sales tax, which varies from place to place within the state. To get correct tax rate and location code, which identifies the place of the sale, you may contact the Department of Revenue.

Use Tax or Retail Sales Tax (Taxes on mobile home transfers)

if the transaction involves any of the following, the use tax or retail sales tax must be paid: 1) the initial retail sale of the mobile home 2) a unit that is still mobile, without a foundation or utility connections 3) removal of the mobile home from the land 4) a transfer is from a dealer's sales lot of either a new or used mobile home

Preparing Personal Property Documents

personal property documents are prepared in the same manner as real estate documents. The items of personal property, must be described in a manner in which will be "reasonably identify" them. Use the full description in the parties agreement and other documents and always include the type of property being described, with as much additional information as possible, such as the model and serial number. Use other identifying characteristics such as the size, color, type of material, etc. For fixtures, timber, minerals, or growing crops, the legal description of the land must also be included. "IBM personal computer, model PC-XT, serial number 123456." "Two 'Superclean Model 22' washer-dryers" "One yellow metal three-drawer filing cabinet" "2003 'Voyager' mobile home, 40'x16', Vehicle Identification Number 93VMH1234567"

Vehicle/Vessel Bill of Sale

prepared to transfer the registered owner's interest in a motor vehicle or mobile home. To release an existing security interest, an Affidavit of Loss/Release of Interest/Gross Weight License must be completed. A Vehicle Record Request will be used for a title search on a motor vehicle or mobile home.