What is a Trust Deed?

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What is a Trust Deed?

A trust deed is a type of deed in which the legal title for real property is first transferred to a trustee, rather than directly to the purchaser or beneficiary.  The trustee will hold the property, usually as security for a specified loan or debt between the borrower and the lender.  The borrowing party is named the “trustor”; the lender is usually called the beneficiary of the trust deed.

Trust deeds are sometimes referred to as a “deed of trust”.  They are similar to mortgages, except that three parties are involved, rather than simply a lender and borrower.  Home purchases are generally accomplished either through a mortgage or a trust deed.

When Can a Trust Deed Be Used?

Trust deeds are useful in situations where the lender is loaning large amounts of money to the borrower, and some form of security is needed for the loan.  In such situations, the borrower will usually place their home as the security for the loan.  The trustee holds the person’s property until the loan is paid off. 

Can the Trustee Sell the Property?

In some cases, the trustee may be authorized to sell the property.  For instance, if the borrower is unable to make the payments as promised in the loan contract, it could result in the sale of their property.  The sales profits would then be used to reimburse the borrower for the missed payments.

However, if this is allowed, it is clear that such sales must take place according to state law, and according to the terms of the deed of trust agreement. The borrower will usually have some period of time to make good on the missed payments in order to prevent such a sale.  This is known as the “right of redemption” and is typically a standard feature of most trust deeds. 

What if I Have a Dispute Over a Trust Deed?

Legal disputes over trust deed can be common.  This is often due to the involvement of another party (i.e., the trustee).  While the involvement of a trustee can be helpful, it can sometimes lead to legal disputes.  Some common legal disputes involving trust deeds may include:

Legal remedies for trust deed violations may vary depending on the legal issues involved.  In some cases, a damages award may be issued to the non-breaching party to help them recover losses.  In other cases, an injunction may result, such as court order instructing the parties to rewrite their agreement.

Do I Need a Lawyer for Help With a Trust Deed?

Trust deeds are quite complex legal arrangements.  They typically require the assistance of a lawyer.  You may wish to hire a qualified real estate attorney in your area if you will be working with a trust deed.  Your lawyer can help you with any documents, negotiations, or court appearances.  Also, your attorney can represent you in the even that you need to file a lawsuit. 

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Last Modified: 04-30-2013 02:38 PM PDT

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