REALWorld Law

Real estate finance

Types of security

What sort of security is typically created or entered into by an investor who is borrowing to acquire or develop real estate?



Typically, a borrower acquiring or developing real estate will provide a mortgage over land in favour of the lender. A mortgage entitles the lender to take possession of the asset and dispose of it, with priority over unsecured creditors.

A corporate borrower may also provide a security interest in all (or some) of its current and future assets by way of a general security agreement. A general security agreement will include a security interest in circulating assets. Circulating assets form a class of assets which in the course of the borrower’s business changes from time to time and which may be disposed of without consent of the lender.

Guarantees and indemnities from third parties are also often provided to lenders and these may be supported by a mortgage or a general security agreement in favour of the lender.

Security can also be granted over assets such as a lease.