Imagine lending money to a person, and as security, that person gives you their house’s deed. Are you now temporarily the property’s owner until paid off? Or are you like a bank that just holds a mortgage on the borrowers’ property?
Deed as Security: Ownership vs. Mortgage
Florida Statutes § 697.01 gives us the answer. It states in part,
(1) All conveyances, obligations conditioned or defeasible, bills of sale or other instruments of writing conveying or selling property, either real or personal, for the purpose or with the intention of securing the payment of money, whether such instrument be from the debtor to the creditor or from the debtor to some third person in trust for the creditor, shall be deemed and held mortgages, and shall be subject to the same rules of foreclosure and to the same regulations, restraints and forms as are prescribed in relation to mortgages.
It’s that simple. If you give money to someone, and they give you a deed as security, the law doesn’t see that deed as proof that you own that real estate, but rather as a bank/mortgagee.
The Legal Perspective: Deed as Mortgage
In Purcell v. Williams, 511 So. 2d 1080 (Fla. 1st DCA 1987) for example, the First District Court of Appeal, interpreting § 697.01, explained that “an agreement for deed, [] typically defined as an agreement that requires the seller to convey legal title to the buyer after the buyer pays all of the installments of the purchase price . . . is primarily utilized as a security device and an alternative to immediate conveyance of title to the buyer with a purchase money mortgage back to the seller.”
Recognizing the Nature of Agreement for Deed
Similarly, the Fifth District Court of Appeal in Free v. Free, 936 So. 2d 699 (Fla. 5th DCA 2006) held, “The Legislature and this court have declared that such agreements [simultaneous exchanges of deed and money] are essentially mortgages with attendant rights and remedies provided to mortgagors and mortgagees, which include the seller’s remedy of foreclosure if the buyer defaults and the buyer’s right of redemption.”
Proper Remedy for Mortgage Holders
Therefore, the mortgage holder’s [the lender’s] proper remedy when it is not paid back the money is not ejectment, but a foreclosure action. See Luneke v. Becker, 621 So. 2d 744, 746 (Fla. 2d DCA 1993).
For more information about mortgages, deeds, or real estate law, contact one of our experienced attorneys at 305-570-2208. You can also email commercial attorney Eduardo directly at eduardo@ayalalawpa.com.
We at Ayala Law PA are passionate about helping those in legal need, so please don’t hesitate to schedule a case evaluation with us online here.
