Legal Definitions - landed security

A landed security refers to a type of collateral for a loan or debt where the asset pledged is real estate. This means that land, along with any buildings or permanent structures on it, is used to guarantee the repayment of a financial obligation. If the borrower fails to repay the debt as agreed, the lender has the legal right to seize or sell the specific property that was offered as security to recover their money.

Here are some examples to illustrate the concept of landed security:

• Residential Mortgage: When an individual purchases a home, they typically take out a mortgage loan from a bank. The home itself, including the land it sits on, serves as the landed security for that loan. If the homeowner stops making their mortgage payments, the bank has the right to initiate foreclosure proceedings, ultimately taking possession of the house and selling it to recoup the outstanding debt.

• Commercial Property Loan: A small business owner might seek a loan to buy a new office building for their expanding operations. To secure this loan, the bank will require the business owner to pledge the new office building and its underlying land as landed security. This arrangement ensures that if the business encounters financial difficulties and cannot repay the loan, the bank can claim the commercial property to recover its investment.

• Agricultural Land for Farm Equipment: A farmer needs a significant loan to purchase new, expensive agricultural machinery. The bank agrees to provide the loan, but requires a portion of the farmer's productive farmland to be put up as landed security. In this scenario, the specific parcel of farmland acts as a guarantee. If the farmer defaults on the loan, the bank would have a legal claim against that land to satisfy the debt.