Also known as: subject to mortgage · encumbered by mortgage
Written by attorneys · grounded in primary & secondary sources — see below
A phrase in a deed or contract indicating that the transferee takes title to mortgaged real estate without assuming personal liability for the underlying debt. The mortgage lien remains attached to the land and enforceable against the property in the transferee's hands. The original mortgagor stays personally liable on the note unless the lender releases that obligation or the transferee expressly assumes it.
MetroPoint Capital deeded its mortgaged building to its new subsidiary MP Midtown LLC. The recorded deed recited only that the transfer was subject to the existing mortgage held by BankWest. When MetroPoint stopped payments, BankWest foreclosed on the building now titled in MP Midtown. The subsidiary's ownership remained subject to the recorded lien even though it never assumed personal liability on the note.
Lena sold her restaurant building to Harbor Dining Group for a reduced price that reflected the outstanding mortgage balance. The deed stated that Harbor took the property subject to the mortgage but contained no assumption language. When Harbor later defaulted, the bank foreclosed on the building and obtained a deficiency judgment against Lena alone because she had signed the original note and Harbor had not assumed the debt.
Select any source to read its text and confirm it supports the definition.
No. The phrase subject to the mortgage means the buyer takes title subject to the lien but does not assume personal liability. Personal liability arises only if the buyer expressly assumes the debt or the lender agrees to a novation releasing the original borrower.
Yes. The mortgage lien remains attached to the real estate regardless of the change in ownership. The mortgagee may foreclose against the property in the hands of the transferee even though the transferee never assumed the debt.
The original mortgagor remains personally liable unless the lender releases that obligation. The transferee who takes merely subject to the mortgage does not become personally liable, so any deficiency after foreclosure is pursued against the original borrower.
Yes. Under the modern rule a specific devise passes subject to any mortgage existing at the date of death without any right of exoneration, even if the will contains a general directive to pay debts from the estate.