Protect Tennessee Real Estate: Secure Lending and Clear Title
TL;DR: In Tennessee, record properly to protect lien priority, clear title issues before funding, confirm property taxes, use UCC fixture filings for fixtures and state filings for other collateral, and understand nonjudicial foreclosure requirements. Work closely with Tennessee counsel and your title company to reduce risk.
Why Title and Secured Lending Matter in Tennessee
Whether you are purchasing, refinancing, or lending against Tennessee real estate, the quality of your title and the strength of your security instruments determine your risk. Clear title reduces the chance of disputes, while properly documented and recorded liens preserve priority against other creditors and later purchasers.
Core Tennessee Instruments: Deeds of Trust and Assignments of Rents
Tennessee real estate loans are commonly secured by a deed of trust naming a trustee for the lender. Deeds of trust are recognized in Tennessee foreclosure statutes, which address sales under deeds of trust and mortgages. See, for example, Tenn. Code Ann. § 35-5-101. Loan documents may also include an assignment of rents and leases to capture income from the property upon default; the drafting and enforceability of those provisions should be reviewed with counsel based on the specific facts and documents.
Perfection and Priority Through Recording
In Tennessee, recording real property interests in the county where the property is located serves to protect priority against later claimants. Tennessee is generally a race–notice jurisdiction: unregistered instruments are ineffective against creditors and bona fide purchasers without notice, and priority typically turns on registration and notice. See Tenn. Code Ann. § 66-26-101 and § 66-26-102 (with additional notice principles in § 66-26-105). Because priority can be affected by timing, indexing, and notice, coordinate closing, disbursement, and recording to minimize gaps.
Chain of Title, Searches, and Curative Measures
A thorough title search should review the chain of title, deeds, plats, easements, restrictions, judgments, tax liens, UCC fixture filings, and pending litigation that could cloud title. Curative steps may include corrective deeds, releases, affidavits of scrivener’s error, boundary agreements, or quiet title actions. Address name variations, vesting issues, and missing spousal signatures when homestead or marital property rights may be implicated.
Title Insurance: Owner’s and Loan Policies
Title insurance policies help transfer risk. An owner’s policy protects the buyer’s title interest, while a loan policy protects the lender’s lien position. Endorsements can address zoning for improved property, restrictions, access, contiguity, variable rate coverage, and survey-related matters. Work with counsel and your title insurer to tailor endorsements to the property type and deal structure.
Surveys, Legal Descriptions, and Boundary Issues
Accurate legal descriptions and current surveys reduce risk from encroachments, setback violations, and access gaps. For commercial deals, a recent ALTA/NSPS survey with lender and title company reliance can support extended coverage endorsements. See the current ALTA/NSPS Land Title Survey Standards. Confirm consistency across the purchase agreement, deed, deed of trust, and any easements.
Escrows, Taxes, and Special Assessments
Confirm the status of ad valorem taxes, special assessments, and any PILOT arrangements. In Tennessee, property tax liens attach and are superior as provided by Tenn. Code Ann. § 67-5-2101. Consider escrows for taxes, insurance, and agreed repairs or post-closing curative items.
UCC Fixture Filings and Personal Property Collateral
Real estate loans often include personal property collateral such as fixtures, equipment, and rents. In addition to the deed of trust, lenders may file a UCC fixture filing in the county real estate records to perfect an interest in goods that become fixtures, and file with the Tennessee Secretary of State to perfect interests in general personal property. See Tenn. Code Ann. § 47-9-501, § 47-9-502, and § 47-9-334. Align collateral descriptions across documents.
Closing Protections and Funding Mechanics
Use a pre-closing checklist to confirm entity authority, good standing, organizational consents, insurance certificates, title proformas, payoff letters, subordination and non-disturbance agreements, and tenant estoppels. Coordinate wire timing with recording so lien priority is preserved. Consider gap coverage from the title company to cover the period between closing and recording.
Common Pitfalls in Tennessee Transactions
- Relying on abbreviated legal descriptions that omit calls or plats.
- Overlooking prior deeds of trust, judgment liens, or HOA liens that affect priority.
- Missing spousal joinder when homestead or marital rights may apply.
- Not recording assignments after loan sales, leaving chain of lien imperfect.
- Neglecting fixture filings for significant improvements and equipment.
- Assuming private road access is insured without an access endorsement.
Tennessee Quick Tips
- Record immediately after funding or use escrowed recording to avoid priority gaps.
- Order tax status letters early; verify no delinquent county or municipal taxes.
- Confirm borrower and spouse signatures where homestead rights could be triggered.
- Match names and legal descriptions across the PSA, deed, deed of trust, and UCCs.
Remedies and Enforcement Considerations
Deeds of trust typically provide for nonjudicial foreclosure procedures if a borrower defaults, subject to statutory requirements, notice, and sale processes. Tennessee statutes address advertisement and notice for sales under deeds of trust and mortgages. See Tenn. Code Ann. § 35-5-101 and related provisions such as § 35-5-104. Because timelines and notices can vary by facts and local practice, plan ahead with a clear enforcement roadmap.
Practical Steps to Protect Your Position
- Engage Tennessee counsel early to conform documents to state law.
- Order title commitments and surveys early and clear all requirements.
- Reconcile names, entities, and signing authority across all documents.
- Record promptly and track indexing; obtain final policies post-closing.
- Maintain a tickler system for tax payments, insurance renewals, and continuation filings.
How We Help
We advise buyers, sellers, developers, and lenders on Tennessee real estate secured transactions. Our team drafts and negotiates deeds of trust and loan documents, resolves title defects, coordinates closing and recording, and manages enforcement strategies when needed. Have questions? Contact our Tennessee real estate team.
FAQ
Is Tennessee a race or notice state for recording?
Tennessee operates as a race–notice jurisdiction, meaning priority generally depends on recording and lack of notice of prior interests.
Where do I file a UCC fixture filing?
File in the county real estate records where the related real property is located, and file with the Tennessee Secretary of State for general personal property.
Do unpaid property taxes affect priority?
Yes. County property tax liens can attach and be superior to other liens until paid.
Can I foreclose nonjudicially under a deed of trust?
Yes, if your documents and Tennessee statutes are followed, including advertisement and notice requirements.
Disclaimer: This blog is for general informational purposes only and is not legal advice. Tennessee law and local procedures can change and may vary by county and specific facts. Reading this post does not create an attorney–client relationship. Consult a Tennessee-licensed attorney about your situation.