Defeasance Clause: Mortgage Florida

Defeasance Clause Information

The defeasance clause provides: the automatic release of the mortgage lien upon full payment, the borrower's right to a satisfaction of the mortgage once paid, and the legal basis for demanding that the lender record a satisfaction. In modern practice, defeasance also refers to a commercial loan prepayment method: the borrower substitutes U.S. Treasury securities for the property as collateral, allowing the property to be released from the lien while the treasury securities continue to service the debt.

Florida Legal Definition

Defeasance in Florida is governed by: the mortgage terms and Florida Statutes §701.04 (Satisfaction of Mortgage). Under §701.04, the lender must deliver a satisfaction within 60 days of full payment. Failure results in the borrower's right to: self-satisfy the mortgage and recover damages and attorney's fees from the lender.

How It's Used in Practice

In practice, attorneys use defeasance clauses to protect borrowers. The attorney: verifies the defeasance language in the mortgage, monitors the lender's compliance with §701.04 (60-day satisfaction requirement), exercises the self-satisfaction remedy if the lender fails to comply, and for commercial defeasance transactions: coordinates the purchase of treasury securities, the release of the property, and the substitution of collateral.

Key Takeaways

• Defeasance clause: voids mortgage lien upon full payment.
• Lender must satisfy within 60 days of payoff (§701.04).
• Borrower may self-satisfy if lender fails.
• Commercial defeasance: substitute treasuries for property collateral.
• Attorney monitors compliance and enforces borrower's rights.

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