Legal Definitions - reconveyance

Reconveyance refers to the legal process of transferring ownership or title of property back to its original owner or a previous holder. This action typically occurs after a specific condition has been met, most commonly the full repayment of a debt that was secured by the property.

In the context of real estate, reconveyance is particularly common. It signifies the transfer of legal title from a lender (or a trustee acting on the lender's behalf) back to the borrower once a mortgage or deed of trust loan has been fully paid off. This process effectively removes the lender's claim or lien on the property, confirming the borrower's clear and unencumbered ownership.

Here are some examples illustrating reconveyance:

• Mortgage Payoff: Imagine Maria has diligently made payments on her 30-year home mortgage. For the duration of the loan, the bank (or a trustee on the bank's behalf) held a legal interest or lien on her property. When Maria makes her final mortgage payment, satisfying the entire debt, the bank initiates a reconveyance. This legal step involves the bank (or its trustee) executing a document, often called a "deed of reconveyance," which formally transfers the full, clear title of the house back to Maria. This confirms her complete ownership, free from the bank's claim.

• Business Equipment Loan: A small manufacturing business, "Precision Parts Inc.," needed a substantial loan to upgrade its machinery. As part of the loan agreement, Precision Parts temporarily transferred the legal title of an older, but still valuable, piece of equipment to the lender as collateral. Once Precision Parts successfully repays the entire loan amount, the lender performs a reconveyance. This action legally returns the title and full ownership of the equipment back to Precision Parts Inc., removing the lender's security interest and restoring the company's unencumbered control over its asset.

• Trust Termination or Modification: Mr. Chen established a revocable living trust and, as part of his estate planning, transferred the title of his vacation cabin into the trust. Years later, he decides to sell the cabin directly in his own name, rather than having the trust manage the sale. To do this, Mr. Chen, acting as the trustee of his own trust, executes a reconveyance. This legal document transfers the title of the vacation cabin out of the trust and back into his personal name, allowing him to proceed with the sale as the direct, individual owner.