California Real Estate Practice Exam

When purchasing a "business opportunity" and using personal property acquired to secure a loan, which of the following is necessary to "perfect" the transaction?

1. The contract developed to facilitate the sale

2. Filing of the financing statement

3. Filing of the security agreement

4. Recording the original contract

The correct answer is: The contract developed to facilitate the sale

To perfect a transaction involving a business opportunity where personal property is used as collateral for a loan, filing a financing statement is essential. This legal document provides notice to third parties that the lender has a security interest in the collateral. In the context of secured transactions, "perfection" establishes the lender's claim to the collateral against other creditors and protects their financial interest. Filing the financing statement creates a public record, which is critical in ensuring that the lender's security interest is recognized and enforceable. It serves to notify potential creditors of the lender's rights in the property securing the loan. The other aspects mentioned, such as the contract for the sale, the security agreement, and the original contract recording, do not function in the same capacity as the financing statement in terms of establishing priority and providing public notice. While these documents are important for various reasons in the transaction and ensuring compliance with contractual obligations, the filing of the financing statement is specifically required to complete the legal process necessary for perfecting the security interest.