What is a deed-in-lieu?

dsadsadasDebtors who have defaulted on their obligations under a real estate security agreement typically face foreclosure, either judicial or non-judicial.  A deed in lieu of foreclosure is another type of procedure to deal with a distressed property.  A deed in lieu is a transfer to a lender of title to real estate that fully or partially satisfies the debt that the property secures. These transactions may have significant benefits for both parties. First, a deed in lieu saves much of the time and cost of a foreclosure and gives the lender more direct and immediate control of the property. A deed in lieu may also be beneficial to the debtor if he or she just wants to convey the property and essentially be done with it.


While deeds in lieu have these advantages there are some potential pitfalls to this procedure.  First, if there are junior mortgages or liens on the property the deed in lieu does not serve to extinguish those liens.  In the event that there are junior liens, chances are good that unless the senior and junior lienholders negotiate an agreement the junior liens will be advanced against the title in the senior lienholder’s hands.  Second, a deed in lieu may be considered to be an equitable mortgage and not a complete conveyance. Only one Washington case has held found a deed in lieu to be an equitable mortgage, but depending on the nature of the transaction it remains a possibility.  Finally, a deed in lieu may be set aside on the grounds of fraud or overreaching. Washington courts have failed to do so thus far but other jurisdictions have done so, particularly when the value of the land exceeds the indebtedness or when the lender is desperate or suffers a disability.

With these advantages and possible pitfalls in mind, but before a deed in lieu is actually conveyed, the mortgagor and the lender should enter into an agreement that covers these details.

Photo Credit: Renjith Krishnan/

How do I know whether my deed to property is superior to other, conflicting deeds?

One of the most depressing things to experience as a property owner, is the realization that your rights to property are junior to a third party’s.

In a few recent cases involving condominium parking, parties were locked into a dispute regarding who had rights to particular parking spaces. To a casual observer, this may not see like a big deal, but to a condo-owner, parking spaces are vital to any future rental opportunities. (Who wants to live in an apartment where you have no parking space?)

When developers complete condo construction projects, they usually draft and record covenants, conditions and restrictions (CC&Rs) that govern the units overall. Contained within these document are usually tables that outline specific parking assignments. However, often times the developers also reserve the right to change those parking assignments to meet the specific needs or wants of prospective property owners. This allows for not only a degree of flexibility in establishing the parking, but it offers a way for the developer to sweeten the sale of a particular condo by offering specific (usually more convenient) parking spaces. Once those units are sold, however, and a valid statutory warranty deed is transferred to the buyer of the property, those parking spaces become part of the ownership of that particular condo. Therefore, any subsequent purchasers of the property cannot claim rights to those parking spaces, regardless of what is contained in the CC&Rs.

In general, the way that you determine whether your title has superiority to another is twofold. First, if your title was recorded before the other title was recorded, then you have priority. Second, the transfer of the property MUST be valid! In other words, even if you record your deed to the property, the property you receive must have been transferred to you from someone who has the actual ownership rights to do so.