Also known as: security interests in real property · real property security interest
Written by attorneys · grounded in primary & secondary sources — see below
A security device by which real property is pledged to secure payment of a debt or performance of an obligation. In a deed of trust title is conveyed to a trustee to hold for the benefit of the lender until the debt is paid. The mortgagor retains possession and the right to redeem.
Red Rock Farms signed a promissory note and a deed of trust naming Morgan as trustee to secure an operating loan from Plains Ag Lenders. The deed described the farmhouse, barns, and acreage as collateral. After default Plains directed Morgan to foreclose on the real property described in the instrument.
Tara executed a document titled deed of trust naming Murray as trustee to hold title for Brook Food until extended credit was repaid. The instrument referred to her mixed-use building and was delivered in exchange for additional goods. Upon default Brook Food asserted rights under the security instrument against the real property.
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Execution and delivery of a written instrument that identifies the land and shows intent to pledge it as security for a debt creates the interest. The borrower conveys title to a trustee for the lender's benefit while retaining possession and the equity of redemption. Recording protects the interest against third parties.
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No. The owner's execution and delivery of the instrument that pledges the land as collateral is sufficient. The trustee may accept the role by later acting under the instrument such as by noticing a sale.
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No. A donor's use restriction may create a covenant or charitable obligation but does not negate the owner's ability to grant a security interest or bar the lender from foreclosing after default.
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The instrument creates a security interest when it recites a fixed loan amount, repayment schedule, and power of sale upon default while describing the property as collateral pledged solely to secure repayment. Profit-sharing or management-control provisions do not convert the transaction into a joint venture when the core documents establish a debt-security arrangement.
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