Notice of Security Interest to Buyers of Farm Products
In Indiana, secured lenders need to be aware that they must provide a notice to the buyers of farm products if the buyer is to take the farm products subject to the lender’s security interest. Failure of the secured lender to send such a notice to the buyer will not obligate the buyer to deliver proceeds of the sale to the secured lender. The secured lender could miss out on the opportunity to collect such proceeds before they are in the hands of the debtor. Of course, the secured lender would still have a security interest in such proceeds, but once the proceeds are in the hands of the debtor, those proceeds may be spent by the time the secured lender seeks to collect them.
In order for the secured lender’s notice to be valid, the buyer must receive the notice within one year before the sale of the farm products. The notice must include, among other provisions:
name and address of the secured party,
name and address of the debtor,
description of the farm products subject to the security interest, including, crop year, description of the product, and amount of the product, and
county where located.
Of course, merely sending the notice of the security interest does not create the security interest in the farm products as it does not perfect the security interest. The secured party also needs to be sure to attach and perfect its security interest. Lenders who are taking farm products as collateral need to make sure that they are aware of security interest issues that can arise during the loan documentation process and that these issues are being properly addressed.