What is a deed of trust?
A deed of trust is the instrument that secures a Virginia real estate loan by granting the property to a trustee in trust for the debt. Unless it says otherwise, the law reads in the owner's promise to pay the property taxes and the trustee's power to sell at auction on default, and once the debt is paid the lien creditor owes a certificate of satisfaction.
Three roles on one recorded instrument: grantor, trustee, and the holder of the debt
Open a recorded deed of trust and three parties are doing three different things. The owner grants the property. A trustee receives it, in trust. And a lender, or whoever holds the debt, is the party the trust exists to protect.
Virginia's statutory form, at Va. Code 55.1-316, is short. The grantor grants property to the trustee "in trust to secure" the debts the instrument describes. What the trustee receives, it holds in trust for that debt; securing the debt is the whole purpose of the grant. The one-line meaning, and where the term turns up in a local deal, is in the definition of deed of trust.
- Grantor
- The owner who signs and grants the property in trust to secure the debt. In a purchase with a loan, that is the buyer.
- Trustee
- The party named to hold the property in trust, with duties and powers the statute reads in unless the instrument provides otherwise, including the power to sell on default at a beneficiary's request.
- Beneficiary
- The holder of the debt the deed of trust secures, usually the lender. The statute's default rules act at a beneficiary's request.
A deed of trust is not the deed that conveys a property from seller to buyer. The deed moves ownership; the deed of trust secures a debt against it. The trustee's qualifications, the credit line version and how a trustee's sale is noticed and advertised are procedure, set out step by step in the Land 101 guide to deeds of trust, explained.
Unless the instrument says otherwise, the Code supplies its duties
A deed of trust is a contract first. The statute says so, and then fills in what the parties left out.
Every deed of trust to secure debts or indemnify sureties is in the nature of a contract and shall be construed according to its terms to the extent not in conflict with the requirements of law.
Va. Code 55.1-320
The same section then lists duties, rights and obligations it reads into every deed of trust "unless the deed of trust provides otherwise." Two of them matter most to an owner living with one.
The property's taxes and charges
The grantor is deemed to covenant to pay all taxes, levies, assessments and charges on the property. So under the default terms, paying the tax bill is also a covenant the instrument carries, not only a county matter.Sale on default
Unless the instrument says otherwise, a payment default or a broken covenant, at any beneficiary's request, obliges the trustee to call the whole debt due, with a power to sell the property at auction. The notice and sale steps are procedure, followed in the guide.Those are defaults, and a particular instrument can change them. What a specific deed of trust says, what counts as a default under it, and what options or defenses a borrower may have are questions for an attorney who has read that document.
Unrecorded, it is void as to purchasers for value without notice and lien creditors
What recording changes for a deed of trust is written into one subsection of the Code, and it is about outsiders to the loan.
Under Va. Code 55.1-407 A 1, a written contract, a deed, or a deed of trust is void as to purchasers for value without notice and as to lien creditors until it is recorded in the county or city where the property lies. That rule gives a lender its reason to record, and it is why a title search looks for recorded deeds of trust against a parcel. The office and the process for Carroll County are covered in where to record a deed in Carroll County.
Recording also carries a tax figured on the debt rather than on the price of the land. Its rate, and who bears it among the other charges, are taken up in who pays closing costs in Virginia.
Paying the debt off does not clear the record by itself; a release has to follow
A deed of trust that has been paid stays in the land records until something recorded says it is satisfied. Virginia puts that duty on two parties, in two sections.
Upon discharge, other than by sale by the trustee, of all debts, duties, and obligations imposed by the deed upon the grantor, including any expenses incurred preparatory to sale, then upon the grantor's request the trustee shall execute and deliver a good and sufficient deed of release at the grantor's own proper costs and charges.
Va. Code 55.1-324 B
The lien creditor has a separate duty under Va. Code 55.1-339 B 1. Except as a later article of the same chapter provides, after full or partial payment of a debt secured by a deed of trust, it must issue a certificate of satisfaction, or of partial satisfaction, in a form fit to record, with a narrower rule for a credit line deed of trust set out in the Land 101 guide. A creditor that has not, within 90 days after payment, either provided the certificate to the settlement agent or delivered it to the clerk's office with the filing fee forfeits $500 to the lien obligor; the section treats judgment lien creditors separately.
Where a deed of trust shows up when land changes hands
A deed of trust can come into a land sale at three different points.
- The seller's old loan. A deed of trust recorded against the tract when the seller borrowed turns up in the buyer's title work and becomes part of what the closing has to resolve. How a sale proceeds with a lien or unpaid taxes against the land is covered in selling land with a lien or back taxes.
- The buyer's new loan. A buyer who borrows can grant a new deed of trust to secure that lender, against the land the buyer is acquiring.
- The seller as lender. Where the seller carries part of the price, the seller can be the one the deed of trust secures. That arrangement, seller financing, is explained in what seller financing on land is.
For an owner getting ready to sell, the existing loan papers belong in the same folder as the deed and the plat. The full list of what a seller gathers is in what documents you need to sell land.
Found a deed of trust recorded against land you plan to sell or buy?
Send the county and the tract. Lowell can point each piece to the person who answers it: the lender for a payoff, the settlement agent for the release, an attorney for the terms. No cost, no obligation.
Got it. Thank you.
We'll be in touch shortly with an honest read.
Questions this raises
What happens if a lender never records a release after a deed of trust is paid off?
Va. Code 55.1-339 B 1 requires the lien creditor to issue a certificate of satisfaction after payment. If, within 90 days after payment, it has neither provided the certificate to the settlement agent nor delivered it to the clerk's office with the filing fee, it forfeits $500 to the lien obligor, subject to the section's exceptions. Clearing the record itself is a question for the settlement agent or an attorney.
Can a deed of trust change the duties Virginia law reads into it?
Yes, within the law. Va. Code 55.1-320 says a deed of trust is in the nature of a contract, construed by its terms to the extent they do not conflict with the requirements of law, and its list of default duties applies unless the deed of trust provides otherwise. What a specific instrument changes is for an attorney who has read it.
Does a deed of trust hand the land over to the lender?
No. In the statutory form in Va. Code 55.1-316, the grantor grants the property to a trustee, in trust to secure the debt; the lender is the party that trust protects, not the one the grant runs to. A deed of trust also does not move ownership from a seller to a buyer, which is the deed's job. What a particular instrument provides is for an attorney who has read it.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Va. Code 55.1-316, form of deed of trust Virginia General Assembly
- Va. Code 55.1-320, construction of deeds of trust and the duties read in Virginia General Assembly
- Va. Code 55.1-324 B, deed of release on discharge Virginia General Assembly
- Va. Code 55.1-339 B 1, certificate of satisfaction after payment Virginia General Assembly
- Va. Code 55.1-407 A 1, recording and notice Virginia General Assembly
- Va. Code 58.1-803, recordation tax on deeds of trust Virginia General Assembly