Trust deeds are your first and most important line of defense when putting capital at risk. Yet even seasoned lenders misunderstand or overlook key parts of this legal document. That’s where things can go sideways fast.

A well-structured trust deed doesn’t just protect your money. It gives you leverage when deals get bumpy, enforces your loan terms, and helps you avoid costly litigation.

Below, we’ll walk through the essentials every private lender should know before recording another trust deed.

What Is a Trust Deed, and How Is It Different From a Mortgage?

In most private lending deals, especially in non-judicial foreclosure states like California, trust deeds (deeds of trust) are used instead of traditional mortgages. The key distinction is the third-party trustee.

A trust deed involves three parties:

• The borrower (trustor) who receives the funds
• The lender (beneficiary) who provides the loan
• The trustee who holds the title and facilitates foreclosure if needed

Trust deeds streamline enforcement. If a borrower defaults, the trustee initiates foreclosure on the lender’s behalf, often faster and with fewer court requirements than a judicial foreclosure.

The Purpose of a Trust Deed in Private Lending

A trust deed is not just a record of the loan. It’s your security instrument. It creates a lien on the property and establishes your right to enforce repayment through the property itself.

Done correctly, a trust deed protects:

• Your lien priority ensures you get paid before junior lienholders
• Your right to foreclose, without court intervention, in most states
• Your ability to recover legal fees and costs, if spelled out
• Your enforceability, even in disputes or bankruptcy

Your investment could be exposed if the trust deed is incomplete, vague, or recorded incorrectly, even if the promissory note is clear.

Must-Have Clauses to Include in Every Trust Deed

Every lender should review or customize the deed of trust for each deal. Relying on boilerplate forms can lead to problems if the terms don’t match your loan structure.

We recommend including:

• Acceleration clause allows you to call the whole loan due on default
• Power of sale clause permits non-judicial foreclosure
• Assignment of rents so you can collect rent from the property in default
• Default interest rate and late fee terms
• An attorney’s fees clause to recover legal costs if enforcement is needed

At PL360, we often see trust deeds missing these critical protections. Lenders end up in court with less leverage than they thought.

Why Recording Your Trust Deed Matters

You could have the best loan agreement in the world, but if the trust deed isn’t recorded correctly, you may lose your lien position or face enforceability issues.

To protect yourself:

• Record the trust deed immediately after funding, in the county where the property is located
• Double-check legal descriptions and parcel numbers for accuracy
• Confirm that the vesting information matches the borrower’s ownership entity

Errors at this stage can lead to title disputes, subordinated liens, or missed foreclosure rights.

Partnering With a Team That Gets It Right

Trust deeds aren’t just paperwork; they’re the backbone of your legal protection. Getting them right takes attention to detail, local compliance knowledge, and a servicing partner who will take every step.

At PL360, we review every trust deed before it’s recorded, ensuring:

• Lien priority is secured
• Default protections are enforceable
• Local requirements are met
• Servicing can act quickly if the borrower defaults

If you’re unsure about a recent trust deed or want to tighten your loan documents, we’re here to help.

Book a Discovery Call or Request a Free Loan Servicing Audit today.

Let’s make sure your trust deeds are built to protect, not just to record.