Many businesses around New York state have a few important documents that are crucial for their legal rights and protection under the law of the state. One document that businesses cannot remain without is called a deed of trust. This is a type of document that lenders to borrowers use to secure any type of loan and to ensure that those who borrow money have good reason to pay it back.

The deed of trust is not an independent legal document, but rather an accessory to another legal document, such as loan agreement. It acts as an assurance to the lender that the loan will be paid back, and offers a certain level of protection to the lender like a mortgage does. It is a phrase used in different parts of the world, and the terminology may differ in different locations. In the US, the document is also sometimes referred to as a ‘security deed’ and is used in all states in the US except in Louisiana – which considers the document a ‘mortgage deed’.

In this article, we will provide an overview of the deed of trust and will provide an explanation of the document and its function, when we are looking at New York state laws. Further, we’ll also look at some of the expectations of New York state law for the document, as well as, how the document can be used in different situations for certain purposes.

Overview of a Deed of Trust

A deed of trust is a document that is used for security reasons in a loan agreement. The document may also be referred to as a ‘security deed’ or a ‘security agreement’. It is used to offer an additional layer of security to the lender, or the beneficiary, who loans money and also to the borrower, or the trustor, who receives the loan.

The document is the legal contract or agreement between the lender, borrower, and trustee (in some situations). The three parties, and the roles they take on, will be discussed in further detail in the following sections.

Roles of the Parties Involved

For the deed of trust to be in place in a loan agreement, there must be three parties involved in the contract. They are the beneficiary, trustor, and trustee.

The Beneficiary

The beneficiary is the person, typically a lender, to whom the money is owed. This is the person who is providing the loan to the borrower.

The Trustor

The trustor is the one who receives the money from the beneficiary. This individual is the borrower of the loan.

The Trustee

The trustee is the neutral party in the agreement. The trustee does not have any rights in the contract and is not a beneficiary of either party. They instead have the duty of transferring the security to the beneficiary should the trustor default.

The identities of the parties must be clear in order for the deed of trust to be recognized. In some cases, a corporation may hold more than one role in the agreement; for example, a bank may take on all three roles in a loan agreement.

Purpose of a Deed of Trust

The purpose of the deed of trust is to provide an additional layer of security and protection to the lender, or beneficiary, who is lending money and to the borrower, or trustor, who is receiving the loan.

Rather than the beneficiary having to sue the trustor should the trustor default, the beneficiary may simply foreclose on the property that was offered as a security in the agreement and recoup their money from the equity built up in the property. The property is given to the trustee, who holds it until the loan is fully paid and releases it back to the trustor, or the beneficiary if the loan is not paid.

Deed of Trust in New York

In New York State, the deed of trust serves the purpose of offering an alternative method of enforcing loan repayment other than initiating a lawsuit. The document ensures that the beneficiary may efficiently and fairly regain a loan loaned to the trustor. The trustor may automatically default their loan if they are late on their payments and the loan may be enforced without a court appearing in the proceedings.

The deed of trust in New York must clearly and accurately identify the parties involved in the transaction, state the source of the loan, the amount of the loan, terms of payments on the loan, and any other conditions that the parties have agreed to in the agreement.

It is important to note that the deed of trust must be correctly filed with the proper county clerks office for it to be legally binding. Otherwise, the agreement may not be enforced by any party.

Situations Where a Deed of Trust is Necessary

A deed of trust is typically necessary whenever money is owed to someone else as a loan, as it provides an assurance to the lender that they will be able to get their money back. This is important, as it ensures that the lender is willing to loan out money in the first place and that they have some recourse should the borrower fail to repay the loan. This makes the deed of trust an important component of a loan agreement in New York state.

It is also used in situations where a real estate property is involved in the loan agreement, such as if the borrower is using this property to collateralize the loan. In such cases, the deed of trust is used to release the property back to the trustor should the loan be repaid or to the beneficiary should the loan not be paid.

Conclusion: A Deed of Trust in New York

For businesses around the state of New York, it is important to understand the importance of a deed of trust and how it can provide an assurance to the lender that they will receive their loaned money back. The deed of trust is an important document that must be included in the loan agreement in order to secure the beneficiary’s rights should the trustor default on the loan. It is important to note that this document must be properly filed with the county clerks office in order for it to be legally binding.


Deed of Trust,

Loaning Money,

Borrowing Money