How Is a Security Interest Perfected and Given Priority?
Quick answer: Under the Personal Property Security Act, a security interest must first attach to collateral and then be perfected by the method the law recognizes. Registration is common, while possession or control applies to particular assets. Priority usually turns on the applicable PPSA priority rule and timing—not simply on which loan agreement was signed first.
Creation, perfection, and priority
| Stage | Question answered |
|---|---|
| Creation/attachment | Can the secured party enforce against the grantor? |
| Perfection | Is the claim effective against third parties? |
| Priority | Which competing claimant has the superior right? |
| Enforcement | What remedies are available after default? |
Common perfection methods
- Registration: file an effective financing statement in the electronic registry.
- Possession: the secured party or qualifying agent holds the collateral where the law permits.
- Control: used for specified financial assets, including certain deposit accounts or electronic securities.
A practical filing checklist
- Confirm attachment: value, grantor rights, and an adequate security agreement.
- Use the grantor’s exact legal identifier.
- Describe the collateral and covered proceeds accurately.
- Search for prior financing statements and statutory liens.
- File before releasing funds when the transaction permits.
- Retain the registry confirmation and calendar continuation.
- Amend or discharge the notice when the collateral or obligation changes.
Priority is asset-specific
A registered interest may lose to an interest perfected by control where the PPSA gives control special priority. Buyers in ordinary business, purchase-money security interests, proceeds, accessions, commingled goods, and liens created by law can have distinct rules. Analyze each asset and claimant separately.
Frequently asked questions
Does the registry prove ownership?
No. It publishes notice of a claimed security interest. Ownership, attachment, authorization, and the underlying agreement remain separate questions.
What if the debtor’s name is wrong?
An error that makes the financing statement seriously misleading can jeopardize perfection. Identity fields deserve exact verification.