Establishing a Security Interest in Real Property (Land)
How to Record the Security Interest
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How does a secured party establish a security interest in real property (land)?
Secured parties must perfect a security interests in land by publicly filing notice of the security in accordance with state recording statutes. Generally, mortgages and deeds of trust must be publicly registered in a government office where the land is located. This is typically known as the recorder or register of deeds office. This recording method is deemed necessary to give notice of ownership rights and interests to those who are interested in purchasing or loaning money for or against the property.
Note: In addition to providing notice, registration (filing) of mortgages also establishes priority for repayment if multiple people loan or lend money secured by the property.
Next Article: What is "Automatic Perfection" of a security interest? Back to: SECURED TRANSACTIONS
Discussion: Why do you think securities interests in land must be filed in the government office where the land is located? Why is perfection by possession insufficient? Why do you think providing notice of security interest is particularly important for real property? Hint: Think about the nature and frequency of home purchasing via mortgages in the United States.
Practice Question: Meredith enters into a contract to purchase real estate from Chase. Chase is going to finance the purchase for Meredith over the next 10 years. What process must Chase follow to establish his security interest in the real estate?