The Role of a Trustee in Commercial Real Estate

By Published On: November 19, 20212 min read

A trustee is a person or firm responsible for property or assets in trust for the benefit of a third party or beneficiary. There are many reasons a trustee might be appointed. Inheriting a trust fund, bankruptcy, or a Deed of Trust for property purchases are all scenarios where a trustee might be assigned. The trustee holds the legal title to the property or asset for the beneficiary through the trust, which is a legal agreement.

The trustee holds and administers the property or assets in the trust and is responsible for any decision-making. All decisions made must be in the best interests of the beneficiary.

What is a Deed of Trust?

A Deed of Trust, like a mortgage, is an agreement for the borrower to pay a certain amount of money back to the lender. Both place a lien on the property. Also, both provide a way for the lender to foreclose on the property when borrowers default.

With a Deed of Trust, a third party is involved with the borrower and the lender, the trustee. Lenders might prefer a Deed of Trust as, in the instance of a failure to maintain payments on the loan, the process of selling the property is more straightforward than with a mortgage. Under a Deed of Trust, the trustee has the power to sell the property without a court order. In contrast, when a borrower defaults on a mortgage, the lender must apply to the court for a judge to issue a court order allowing the sale to proceed.

The state’s law where the property resides usually dictates whether a mortgage or Deed of Trust is used.

Who is the Trustee in a Deed of Trust?

Under a Deed of Trust, the trustee is a neutral third party who holds the legal title to the property until the loan is paid.

The trustee holds the property in trust for the lender and accepts responsibility for the loan repayments.If the borrower defaults on the payments, the trustee will sell the property to pay off the loan in most cases. In some states, there are qualifications required to take on the role of trustee for a Deed of Trust, but typically the trustee would be an attorney or a bank.

The trustee transfers the legal title to the borrower on full repayment of the loan by filing a Deed of Reconveyance with the county recorder.

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