Are you either borrowing money or lending money secured by a promissory note? It is important that you have your note prepared by a Real Estate Lawyer. An unintentional oversight within the body of the note could dramatically alter obligations and rights for both parties. Most people think of a mortgage when making monthly payments for any type of real estate. Actually it is the promissory note that payments are truly being applied to. It is only because of popular nomenclature do we refer to "paying the mortgage". In a mortgage contract, the promissory note holder is obligated to make payments, or the lender will begin foreclosure promissory note proceedings.
The primary sections of a typical note would be:
- Promise to Pay: The borrower promises to pay to the lender the agreed upon amount, at the agreed upon interest rate, compounded upon the agreed upon method.
- Repayment: The agreed upon amount will be repaid in agreed upon installments, paid upon the agreed upon time frame.
- Collateral: Any and all property utilized as security.
- Modification: Any modifications must be in writing and signed by all parties.
- Binding Effect: Grants any exceptions as to who is legally liable.
- Headings: Simply used to summarize sections.
- Breach of Note: Parties agree that a breach of any condition shall not be waived without written notice
- Amendments: Gives parties certain rights to amend the note if agreed upon.
- Governing Law: Stipulates which governing body shall have legal jurisdiction and enforcement of the note.
- Witness and Signature: Endorsement of all parties.
Appearing relatively simple in concept, a promissory note is very complex in construction and application. Great lengths must be taken to construct the document in its proper legalese. Only a Real Estate Lawyer should draft and consequently complete the recordation to avoid potential litigation as a result of contested forms or content. You must in addition ensure that the particular terms and conditions comply with all federal and state laws.