Release
(Deed in Lieu of Foreclosure)

Summary

This template is a release that may be used in connection with a deed in lieu of foreclosure agreement, if the parties prefer to have the release as a standalone document. This template includes practical guidance and drafting notes. As an alternative to foreclosure, a lender may accept a deed in lieu of foreclosure. In such a case, the parties execute a deed in lieu of foreclosure agreement that provides that the owner of the mortgaged property, which is the borrower under a loan that is in default, transfers its title to the mortgaged property directly to the lender or an entity designated by the lender. This is often done to save time and money, especially if the jurisdiction in which the property is located in requires judicial foreclosure, which can be a lengthy and expensive process. The lender will require that the borrower and any guarantors unconditionally release the lender and its affiliates from any claims and potential liability in connection with the property and the loan documents before accepting title to the property through this expedited foreclosure process. The borrower typically has very little power to negotiate any limitations on this release. This release is sometimes incorporated into the deed in lieu of foreclosure agreement or may be a standalone document that is referenced in such agreement but is separately executed. For a full listing of key content covering acquisition lending, see Commercial Real Estate Acquisition Loan Resource Kit and Junior Associate Real Estate Resource Kit (Acquisition Finance). For a full listing of key content covering mezzanine financing, see Mezzanine Financing (Commercial Real Estate) Resource Kit. For a detailed discussion of deed in lieu of foreclosure agreements in commercial real estate loans, see Foreclosure of Real Property. For further guidance on lender remedies and workouts, see Commercial Real Estate Loan Defaults and Remedies, Workouts of Commercial Real Estate Loans, and Commercial Real Estate Acquisition Loan Resource Kit — Workouts.