Deed of Trust

What Is a Deed of Trust?

A deed of trust is a financing instrument that involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee). The borrower transfers legal title to the trustee, who holds it as security for the loan. If the borrower pays the loan in full, the trustee reconveys the title back to the borrower. If the borrower defaults, the trustee can sell the property at auction without going to court.

This is fundamentally different from how Florida handles real estate lending.

Florida Legal Context: Mortgages, Not Deeds of Trust

Florida is a lien theory state that uses mortgages rather than deeds of trust for residential and commercial real estate financing. Under a Florida mortgage, the borrower retains legal title and the lender holds only a lien. If the borrower defaults, the lender must file a judicial foreclosure lawsuit through the circuit court under Chapter 702, Florida Statutes.

Some states (California, Texas, Arizona, and others) use deeds of trust instead of mortgages. In those states, the trustee can conduct a non-judicial foreclosure (also called a "power of sale" foreclosure) without court involvement, which is typically faster and less expensive for the lender.

While deeds of trust are not the standard instrument in Florida, they are occasionally seen in:

• Commercial transactions with out-of-state lenders who use deed-of-trust forms
• Seller-financed deals where the seller's attorney uses deed-of-trust documents
• Properties with multi-state lender portfolios where a national lender applies its standard form

When a deed of trust is recorded in Florida, Florida courts have generally treated it as equivalent to a mortgage, meaning the lender must still go through judicial foreclosure.

Deed of Trust vs. Mortgage

• Parties — A mortgage has two parties (borrower and lender). A deed of trust has three (borrower, trustee, and lender).
• Title — With a mortgage, the borrower keeps title. With a deed of trust, the trustee holds title.
• Foreclosure — Mortgages require judicial foreclosure. Deeds of trust may allow non-judicial foreclosure (not in Florida).
• Release — A mortgage is released by a satisfaction of mortgage. A deed of trust is released by a reconveyance deed from the trustee.

Related Terms

• Lien Theory — Florida's framework where borrowers keep title
• Encumbrance — Both mortgages and deeds of trust are recorded encumbrances
• Recording Statute — Governs priority of recorded security instruments
• Chain of Title — Where security instruments appear in the public record

Barnes Walker Financing Document Review

Barnes Walker's attorneys review all financing documents at closing, including mortgages and any deed-of-trust instruments. If an out-of-state lender submits a deed of trust for a Florida closing, the firm's attorneys ensure the document is enforceable under Florida law. Submit a title inquiry for assistance.

Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC