What is an Equitable Mortgage in Florida? And Why Investors Need to Understand It Before Lending

If you’re investing in Florida real estate, especially in private lending, there’s one legal concept you need to know: the equitable mortgage.

You might think that because you didn’t sign a formal mortgage document, you’re not involved in one. But under Florida law, courts can treat informal loan agreements or property transactions as mortgages, even when no recorded mortgage exists.

This can have serious consequences, especially for investors, lenders, and anyone holding property as “security” for a loan.

Let’s break down what an equitable mortgage is, how it’s created, and why understanding it before lending is critical.

What Is an Equitable Mortgage in Florida?

An equitable mortgage is a judge-made legal doctrine that allows a court to treat a transaction like a mortgage, even if no formal mortgage document was executed.

In plain terms: if someone lends money and expects to have a property interest as collateral, the court can declare the property is subject to a mortgage, even if that wasn’t properly recorded or structured as one.

This doctrine exists to protect borrowers from predatory practices and ensure fairness. But it can also impact investors who believe they’re simply purchasing property or holding title as security.

How Is an Equitable Mortgage Created?

Florida courts look at the substance of the agreement, not just the form. Even if no formal mortgage exists, a court may still find that an equitable mortgage was created based on certain factors.

Here’s what courts typically look for:

• A loan of money was made
• The property was offered as security for that loan
• There is some evidence of intent to treat the property as collateral
• No formal mortgage documents were executed or recorded
  

Examples of situations where equitable mortgages may arise:

• A “Deed as security” situation where an investor has title to the property but the deal is really a loan
• Joint venture agreements that function more like financing arrangements
• A promissory note with no mortgage, but a side agreement or verbal understanding that the property secures repayment
• Sale-leaseback arrangements that are actually disguised loans

Why Should Investors and Lenders Care?

Many real estate investors structure creative deals, especially in private lending, distressed property acquisition, or off-market transactions. If you’re not careful, what you think is a clean purchase or security agreement could be recharacterized as an equitable mortgage.

Key risks for lenders:

• You may have to go through foreclosure to enforce your rights (even if you hold title)
• The borrower may have redemption rights, allowing them to reclaim the property by paying the debt
• You may lose your claim altogether if the court finds your arrangement unfair or deceptive

In short: if it walks like a mortgage and talks like a mortgage, a Florida court might treat it as one, and that changes everything.

Does an Equitable Mortgage Need to Be Recorded?

No. That’s what makes this concept so important.

Equitable mortgages are based on equity, not formal paperwork. That means:

• The mortgage does not need to be recorded
• It may not even be in writing
• Courts can consider emails, conversations, payment records, or conduct

This opens the door for litigation. It also means investors need to be extremely cautious when entering into “nontraditional” real estate agreements.

Can You Enforce an Equitable Mortgage in Florida?

Yes, but it’s not automatic. If you’re trying to enforce an equitable mortgage, you must file a lawsuit for foreclosure, just like a traditional mortgage holder would. The process includes:

• Filing a civil action
• Demonstrating the loan terms and the agreement to use the property as security
• Providing evidence (written or otherwise) of the intent behind the transaction

Courts will look closely at the facts. They may side with you, or they may find the transaction lacked sufficient clarity or fairness.

How to Avoid Equitable Mortgage Disputes as a Lender or Investor

If you’re providing financing or entering into a deal involving real estate and repayment terms, protect yourself up front. Here’s how:

1. Use Clear, Written Agreements

Don’t rely on verbal promises or vague “understandings.” Your loan or investment should be backed by:

• A written promissory note
• A properly executed mortgage
• Recording in the public records

2. Don’t Accept a Deed as “Collateral”

If someone offers you a deed to secure a loan, be cautious. Courts are especially wary of “deed as security” setups and may treat them as mortgages with foreclosure requirements.

3. Consult a Real Estate Attorney

Before structuring the deal, sit down with a lawyer who understands both transactional law and litigation. A well-structured agreement could save you years of litigation and thousands in legal fees.

At Ayala Law, we’ve helped clients draft deals the right way, and fight when others didn’t.

Why Ayala Law PA?

Based in Florida, our firm handles both real estate litigation and transaction structuring. We represent:

• • Private lenders
  • Real estate investors
  • Property owners
  • Developers

If you’re considering a deal that involves holding title, loaning money, or taking a security interest in real estate, we can help ensure your agreement holds up, before it ends up in court.

Equitable Mortgages Are Avoidable If You Prepare

The concept of an equitable mortgage exists to make sure deals are fair, but for investors and lenders, it’s a legal gray area that can easily lead to costly litigation if you’re not careful.

Before you lend, invest, or accept title as collateral, ask yourself:

• What does this deal look like to a judge?
• Is the structure transparent and enforceable?
• Have I protected myself legally and financially?

If you’re not sure, contact an experienced attorney in Miami at 305-570-2208.

You can also contact attorney Eduardo A. Maura at eduardo@ayalalawpa.com.

Schedule a case evaluation online here.