Deed of Trust
What is a Deed of Trust in Texas?
In laymanís language, a deed of trust in Texas is a lien against real property (land). Sometimes a deed of trust is called a mortgage. The land may be improved with structures (for example, a home, or a commercial building, or an apartment complex, or a shopping center), or the land may have no improvements. The purpose of the deed of trust is to provide security or collateral for a lender (whether a bank, or an individual) in the event the borrower (who is the owner of the land) cannot repay the lenderís loan to the borrower.
How does a Deed of Trust function in Texas?
If the borrower is unable to repay the debt (represented by a note), the lender will commence procedures to foreclose (sell by public auction) the deed of trust. The procedures to foreclose the deed of trust are set out in two basic places: the deed of trust will describe in detail the timing and requirements in order to commence and conclude the foreclosure process; and the Texas Property Code. In most cases the deed of trust foreclosure covenants will reflect compliance with the Texas Property Code. However, the deed of trust may also contain special negotiated provisions which require unique notice and opportunity to cure requirements.
Are there special concerns related to a Deed of Trust in Texas?
Occasionally the lender and the borrower negotiate "no personal liability" covenants which limit the borrowerís liability in varying respects. However, the lender and the borrower must be fairly sophisticated before these types of covenants are ever negotiated and inserted into the note and the deed of trust.
What are common formats for a Deed of Trust in Texas?
Deeds of trust in Texas exist in many different formats. Depending on the type of loan you may obtain to purchase or finance land in Texas, the deed of trust format may be: a uniform document used throughout the United States (with Texas specific provisions); your earnest money contract may stipulate that State Bar of Texas documents will be used; or your commercial lender will require that you execute their commercial loan deed of trust. So the deed of trust may be fairly simple (for example, a State Bar of Texas document); or more complex (for example, a FNMA uniform document); or very complex (for example, a deed of trust used to secure a commercial loan).
The uniform deeds of trust cannot be negotiated or revised (these types of notes are routinely sold and assigned to third parties all over the United States, therefore a uniformity in documentation is required). The terms of your earnest money will preserve or waive your right to negotiate the provisions and content of the note and deed of trust. And lastly, your credit standing will establish to some extent your ability to negotiate important changes in your commercial loan documents.
I regularly assist clients in drafting, reviewing, interpreting, modifying, and negotiating all different types of deeds of trust to meet their individual needs.