Promissory Note Template for Real Estate

SECURED PROMISSORY NOTE (REAL ESTATE)

Document ID: RE-PN-2024-V1 Effective Date: [Effective Date] Version: 1.0.1 Governing Jurisdiction: [State/Province], [Country]

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1. STATUTORY & LEGAL COMPLIANCE NOTICE

IMPORTANT NOTICE TO BORROWER: THIS DOCUMENT CONSTITUTES A BINDING LEGAL OBLIGATION. THE LOAN EVIDENCED BY THIS NOTE IS SECURED BY A DEED OF TRUST, MORTGAGE, OR SECURITY DEED ON REAL PROPERTY. CONSULT WITH INDEPENDENT LEGAL COUNSEL PRIOR TO EXECUTION. THIS DOCUMENT IS SUBJECT TO STATE-SPECIFIC USURY LAWS AND FEDERAL REGULATIONS (INCLUDING BUT NOT LIMITED TO THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT). THE TERMS HEREIN ARE INTENDED TO BE INTERPRETED IN ACCORDANCE WITH THE UNIFORM COMMERCIAL CODE (UCC) AS ADOPTED IN THE GOVERNING JURISDICTION.

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2. PARTIES & RECITALS

PARTIES:

• MAKER (BORROWER): [Borrower Full Legal Name], a [Individual/Legal Entity Type], with a principal address at [Principal Address] ("Maker").
• PAYEE (LENDER): [Lender Full Legal Name], a [Individual/Legal Entity Type], with a principal address at [Principal Address] ("Payee").

RECITALS: WHEREAS, Maker has requested that Payee extend credit in the principal amount of [Amount in USD] (the "Principal Sum") for the purpose of [e.g., purchasing/refinancing] certain real property located at [Full Property Address and Legal Description] (the "Property"); and WHEREAS, Payee has agreed to make such loan provided that Maker executes this Note and secures the same with a [Mortgage/Deed of Trust] on the Property.

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3. OPERATIVE CLAUSES & LEGAL TERMS

3.1 Promise to Pay

For value received, Maker hereby unconditionally promises to pay to the order of Payee, at Payee’s principal address or at such other place as Payee may designate in writing, the Principal Sum of [Amount in USD] together with interest on the unpaid principal balance at the rate of [Interest Rate]% per annum (the "Note Rate"), calculated on the basis of a 360-day year of twelve 30-day months.

3.2 Payment Terms & Milestones

(a) Installment Payments: Maker shall pay [Monthly/Quarterly] installments of principal and interest in the amount of $[Payment Amount] beginning on [Start Date] and continuing on the same day of each succeeding month until the Maturity Date. (b) Maturity Date: The entire unpaid principal balance, together with all accrued and unpaid interest and other fees, shall be due and payable in full on [Maturity Date]. (c) Late Interest & Fees: If any payment is not received within [Number] days of its due date, Maker shall pay a late charge equal to [Percentage]% of the overdue payment. Thereafter, all overdue amounts shall bear interest at a "Default Rate" equal to the lesser of [Default Interest Rate]% or the maximum rate permitted by law.

3.3 Scope of Loan & Use of Proceeds

The proceeds of this Note shall be utilized exclusively for the [Acquisition/Improvement/Refinancing] of the Property. Maker represents and warrants that the loan is for [Commercial/Investment/Business] purposes and not for personal, family, or household use, unless otherwise disclosed and documented in compliance with the Truth in Lending Act (TILA).

3.4 Prepayment

Maker reserves the right to prepay this Note, in whole or in part, at any time without penalty or premium. Any partial prepayment shall be applied first to accrued interest and then to the remaining principal balance, and shall not postpone the due date of any subsequent installments.

3.5 Security: Mortgage / Deed of Trust

This Note is secured by a [Mortgage / Deed of Trust / Security Deed] (the "Security Instrument") of even date herewith, covering the Property. The Security Instrument contains provisions for the summary foreclosure and sale of the Property in the event of a default under this Note.

3.6 Mutual Confidentiality & Non-Disclosure

Each party agrees to maintain the confidentiality of the financial terms of this Note and any proprietary financial information disclosed during the due diligence process. Neither party shall disclose such information to third parties, except as required by law, for tax reporting, or to professional advisors under a duty of confidentiality.

3.7 Representations & Warranties

Maker represents and warrants that: (a) Maker has the full power and authority to execute this Note; (b) the execution of this Note does not violate any other agreement to which Maker is a party; and (c) there are no pending or threatened legal actions that would materially affect Maker’s ability to perform under this Note.

3.8 Events of Default

The occurrence of any of the following shall constitute an "Event of Default": (a) Failure to make any payment within [Number] days of the due date; (b) Breach of any covenant or condition contained in the Security Instrument; (c) The filing of bankruptcy or insolvency proceedings by or against Maker; (d) Any material misrepresentation made by Maker in this Note or the loan application.

3.9 Remedies: Acceleration & Collection Costs

Upon an Event of Default, Payee may, at its option and without notice, declare the entire unpaid principal balance and all accrued interest to be immediately due and payable. Payee shall be entitled to recover all costs of collection, including reasonable attorneys' fees and court costs, whether or not a lawsuit is filed.

3.10 Limitation of Liability & Indemnification

To the maximum extent permitted by law, Maker shall indemnify and hold Payee harmless from any and all claims, losses, or liabilities arising out of Maker's use or ownership of the Property. Payee’s liability under this Note shall be limited to the actual damages proved, and in no event shall Payee be liable for consequential, punitive, or indirect damages.

3.11 Dispute Resolution & Arbitration

Any dispute, controversy, or claim arising out of or relating to this Note shall be settled by binding arbitration administered by the American Arbitration Association (AAA) in accordance with its Commercial Arbitration Rules. The seat of arbitration shall be [City, State]. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

3.12 Governing Law & Jurisdiction

This Note shall be governed by and construed in accordance with the laws of the State of [State], without regard to conflict of law principles. Any legal action not subject to arbitration shall be brought exclusively in the state or federal courts located in [County], [State].

3.13 Miscellaneous Provisions

(a) Severability: If any provision of this Note is held invalid, the remainder shall continue in full force and effect. (b) Entire Agreement: This Note and the Security Instrument constitute the entire agreement between the parties and supersede all prior negotiations or agreements. (c) Amendments: No amendment shall be effective unless in writing and signed by both parties. (d) Counterparts: This Note may be executed in counterparts, including electronic signatures, each of which shall be deemed an original.

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4. EXECUTION & FORMAL SIGNATURE BLOCKS

IN WITNESS WHEREOF, the parties have executed this Secured Promissory Note as of the Effective Date first written above.

FOR [PAYEE / LENDER NAME]:

Signature: _____________________________________ Printed Name: [Authorized Signatory Name] Title: [Title / Role] Company: [Lender Full Legal Name] Date: [Date]

FOR [MAKER / BORROWER NAME]:

Signature: _____________________________________ Printed Name: [Authorized Signatory Name] Title: [Title / Role, or "Individual"] Date: [Date]

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5. STEP-BY-STEP EXECUTION & FILING GUIDE

1. Field Completion:

   • Open the document in Microsoft Word or Google Docs.
   • Use the [Bracketed] fields to input specific transaction data. Ensure the "Principal Sum" is written in both words and figures (e.g., One Hundred Thousand Dollars ($100,000.00)).
   • Verify the Legal Description of the property against the most recent Deed.

2. Verification of Authority:

   • If the Maker or Payee is an Entity (LLC, Corp), ensure the signatory has a "Certificate of Authority" or a "Unanimous Consent" resolution authorizing this specific loan.

3. Security Instrument Linkage:

   • Ensure the "Security Instrument" (Mortgage or Deed of Trust) is prepared simultaneously. This Note should be physically attached to or referenced by the Security Instrument for recording.

4. Execution (Digital or Wet Ink):

   • Digital: If using DocuSign/Adobe Sign, ensure the platform generates a "Certificate of Completion" with time stamps and IP addresses.
   • Notarization: While a Promissory Note often does not require notarization to be valid between parties, the Security Instrument (Mortgage) MUST be notarized to be recorded in land records. It is best practice to notarize the Note as well in real estate transactions.

5. Recording & Retention:

   • The original Note should be held by the Payee (Lender). Unlike a Mortgage, the Note is rarely recorded in public records.
   • The Maker (Borrower) should receive a copy marked "Copy."
   • Upon final payment, the original Note must be returned to the Maker marked "PAID IN FULL" and a "Release of Lien" or "Satisfaction of Mortgage" must be filed with the County Recorder.