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A payoff letter is written confirmation by a lender that when the debt is repaid, they will release certain claims and, usually, promise to file any UCC3s to the extent it's a secured loan. These are a closing deliverable in most cases. UCC3s are termination statements that get filed with the applicable SOS once the debt is paid (usually post-closing). You will sometimes have payoff letters for unsecured debts, but, obviously, you wouldn't need a UCC3 for those. It's normal that the partner wants both. Edit to clarify: this is assuming you're in M&A and there's more nuance to it, but this is the 2 second summary.
Some pay off letters authorize borrowers counsel to file the UCC-3 themselves upon confirmation of payoff as well.
If the debt is outstanding and will be paid off with loan funds, you’ll need a payoff letter to confirm the dollar amounts and draft releases. If it’s a lingering filing that has been paid off, release should be sufficient.
Partner wants you or borrower to contact all the lien holders and get payoff instructions. Or, if debts have been satisfied get a release.
Is this in the context of real estate/mortgages? Payoff letters usually state the amount needed to pay off the lien and are provided by the bank/lienholder. UCC3s are used for amending or terminating UCC1s, which is the initial statement filed for the lien. They’re not really related to each other and a payoff letter wouldn’t show up on a lien search. Assuming you’re in NY, UCC1s filed in the county and/or state would show up on the searches.
TL;DR Version-
Payoff letter is something you get from a lender designating the amount needed to pay off a loan and the lenders agreement to release collateral, etc. once that amount is paid.
UCC-3 is the standard document that is filed with SOS to officially terminate a secured position in collateral.