Basic Uniform Commercial Code
Perfection lapses five years after filing. It is then treated as if it never perfected. It is retroactively unperfected. UCC § 9-515.
Someone who perfects within the last five years therefore has priority over someone who perfected before.
To prevent an interest from lapsing, a continuation letter must be filed.
"Continuation statement" means an amendment of a financing statement which:
- identifies, by its file number, the initial financing statement to which it relates; and
- indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.
Copyright, The American Law Institute
Continuation statements must be filed within six months before the expiration of the five years. UCC § 9-515(d).
Continuation statements renew the perfected security interest for another whole five years, not just five years from when the continuation statement was filed.