Trust Deeds

Trust Deeds are legal documents that transfer ownership of real estate to a Borrower by a Lender with a third party called a Trustee holding the real estate in trust as collateral on behalf of the Lender. Deeds of Trust as outlined in the Utah Code.

Promissory Note

In Utah, anytime you see a deed of trust, there is a corresponding Promissory Note. The Lender transfers the real estate to the Borrower through the Trustee who would provide the Lender one or more Promissory Notes which the Lender would hold in its possession as collateral for the real property that has been transferred to the Trustee.

This is done to avoid having a mortgage. Although some people believe that a mortgage and a deed of trust is the same thing it is not.

Use of Property Secured by a Trust Deed

Though the Trustee holds the real estate in trust on behalf of the Lender the Borrower would have possession to the real estate and could use it for the purposes that he has acquired it (such as living in it if the property is a house, or renting it out if the property is a commercial complex), but would be legally constrained from selling the property without notifying the Trustee or paying off the deed of trust), which would be forthcoming only if the amount borrowed from the Lender has been completely paid, the Trust Deed satisfied and the Promissory Notes returned to the Trustee. This is done by a reconveyance in Utah. The reconveyance is recorded in the county recorder’s office.

Non Judicial Foreclosure

A Trust Deed does not need the Lender to file a lawsuit in court to foreclose on the property if the Borrower defaults in payment. The process is non judicial in nature and the approximate time for a trust deed foreclosure is 120 days (give or take).

The Lender could call upon the Trustee to commence Foreclosure proceedings and acquire the real estate by auction or dispose it through a Trustee’s sale and recover the monies of the Promissory Note or notes as the case may be.

The new owner obtains title to the real estate direct from the Trustee through a Trustee’s Deed and the Trustee would take back possession of the initial Promissory Notes provided to the Lender.

The new owner could have the real estate transferred to him on the same procedures and could draw up a new Trust Deed and take possession of the property and use it as a rental unit or to live in as the case may be. If the auction or sale does not generate the full value of the Promissory Notes, the Lender usually cannot sue the Borrower like on a mortgage to recover the balance monies due to them, but the Trustee would transfer the real estate to the Lender on a Trustee’s Deed and re-posses the Promissory Notes. Sometimes you can get a deficiency judgment. You need to speak with an attorney about that because the details of each case matters.

Deeds of Trusts are Preferred in Utah

Lenders prefer Trust Deeds due to the simplicity it allows to bring foreclosure proceedings on defaulting Borrowers without having to file suit in court, unlike mortgages which would need judicial intervention to initiate foreclosure proceedings and is time consuming and a very elaborate process that could take months if not years. Although you can do mortgages in Utah, they are not as common as trust deeds.

When Trust Deeds are initiated and the Borrower defaults and the real estate is sold, the Borrower’s rights ceases with no recourse to any further judicial action.

Real Estate Lawyers in Utah

Whether you need to have a deed of trust and promissory note drafted, or whether you need to start a foreclosure; we are here to help you with your real estate law need.

If you have a question about real estate law, trust deeds, or a foreclosure question, you should contact Greg Lyle at 801-876-5875.