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Deed in Lieu of Foreclosure

Learn about deeds in lieu of foreclosure in Canadian real estate — what they are, how they work, and their benefits for borrowers and lenders.

Deed in Lieu of Foreclosure

August 08, 2025


What is a Deed in Lieu of Foreclosure?

A deed in lieu of foreclosure is a legal agreement where a borrower voluntarily transfers property ownership to the lender to avoid foreclosure.

Why Deeds in Lieu of Foreclosure Matter in Real Estate

In Canadian mortgage law, deeds in lieu of foreclosure allow borrowers to avoid the lengthy and costly foreclosure process while satisfying debt obligations.



Key points:
  • Requires lender agreement and clear title
  • May reduce negative impact on borrower’s credit
  • Can save time and expenses for both parties



Understanding deeds in lieu of foreclosure helps borrowers and lenders manage distressed properties effectively.

Example of a Deed in Lieu of Foreclosure in Action

The homeowner signed a deed in lieu of foreclosure, transferring the property to the bank to settle the mortgage debt.

Key Takeaways

  • Transfers property to lender instead of foreclosure
  • Requires borrower and lender consent
  • Can mitigate credit damage compared to foreclosure
  • Helps avoid lengthy legal proceedings
  • Must clear any junior liens or encumbrances

Related Terms

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

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