Commercial Mortgage Security Agreement


A sale due clause is a provision of a note, mortgage or trust instrument, in which the entire outstanding debt is due and payable immediately, at the creditor`s option, upon sale of the property that serves as security for the loan. As a general rule, these provisions are used to prevent a subsequent buyer from taking over the financing of the existing debtor at a market value lower than the existing market value. A mortgage is a document that mortgages real estate as collateral for the payment of a debt or other obligation. The term “mortgage” refers to the document that establishes the right of pledge on immovable property and that is registered with the local Document Registration Office in order to disclose the right of pledge secured by the creditor. The creditor or lender, also known as a borrower (in a mortgage) or beneficiary (in a fiduciary instrument), is the owner of the debt or other obligation secured by the mortgage. The debtor or borrower, also known as Mortgagor (in a mortgage) or debtor (in a fiduciary instrument), is the person or entity that owes the debt or other obligation secured by the mortgage and owns the real estate that is the subject of the loan. Interconnection agreements are entered into between two or more creditors who have made loans to a single debtor to define the relationship between creditors and the provisions relating to creditors` advances, the appropriate priority of creditors with respect to the debtor`s payments and who will act (and how they may act) in the event of the debtor`s default. A subordination agreement modifies the priority interests in a mortgaged property of one party having priority over another party that would otherwise be subordinated without the subordination agreement. In almost all cases, it is the law of the state in which the property is located that determines whether a mortgage or trust instrument can be used. While a trust instrument that insures real estate under debt has the same purpose and function as a mortgage, there are technical and substantive differences between the two.

A trust deed is executed by the debtor and the owner to an innocent third party, identified as an agent and holding ownership of the property in trust for the creditor; When a mortgage is used, ownership of the security remains with the debtor, and the mortgage creates a right of pledge over the immovable property for the benefit of the creditor. In some jurisdictions, the trust deed allows the agent to acquire ownership of the property without seizure or sale, while others treat a trust as a mortgage.

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