Mortgage Agreement - California

MORTGAGE AND SECURITY AGREEMENT

(California – [COUNTY] Recorder’s Office)

TABLE OF CONTENTS

1. Document Header
2. Definitions
3. Grant of Mortgage & Security Interest
4. Secured Obligations
5. Representations & Warranties
6. Covenants & Restrictions
7. Default & Remedies
8. Risk Allocation
9. Dispute Resolution
10. General Provisions
11. Execution Block
12. Exhibits & Schedules

1. DOCUMENT HEADER

1.1 Parties.
This Mortgage and Security Agreement (this “Agreement”) is entered into as of [EFFECTIVE DATE] (the “Effective Date”) by and between:
a. [BORROWER LEGAL NAME], a [STATE] [ENTITY TYPE], having an address at [ADDRESS] (“Borrower” or “Mortgagor”); and
b. [LENDER LEGAL NAME], a [STATE] [ENTITY TYPE], having an address at [ADDRESS] (“Lender” or “Mortgagee”).

1.2 Recitals.
A. Borrower is indebted to Lender pursuant to that certain Promissory Note dated of even date herewith in the original principal amount of $[PRINCIPAL] (as amended, renewed, or replaced, the “Note”).
B. Borrower desires to secure payment and performance of the Note and all other Secured Obligations (defined below) by granting a mortgage lien on the Property (defined below).
C. The parties intend that this Agreement constitute (i) a “mortgage” under Cal. Civ. Code §§2920-2944 (foreclosure procedures) and (ii) a “security agreement” under Division 9 of the California Uniform Commercial Code.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and adequacy of which are acknowledged, the parties agree as follows.

2. DEFINITIONS

Capitalized terms used but not otherwise defined have the meanings set forth below.

“Affiliate” – Any Person controlling, controlled by, or under common control with a specified Person.
“Applicable Law” – All laws, statutes, ordinances, rules, and regulations of any governmental authority with jurisdiction, including without limitation Cal. Civ. Code §§2924-2924f and Cal. Code Civ. Proc. §§580b, 580d.
“Event of Default” – Any event described in Section 7.1.
“Indemnified Parties” – Lender and its shareholders, members, partners, directors, officers, employees, agents, and assigns.
“Permitted Encumbrances” – Liens, easements, and restrictions of record listed on Schedule 1 that do not materially impair value or use of the Property.
“Property” – The real property described in Exhibit A, together with all improvements, fixtures, and appurtenances.
“Secured Obligations” – (a) all indebtedness evidenced by the Note; (b) all other liabilities of Borrower to Lender arising under any loan documents; and (c) all renewals, extensions, modifications, and future advances.

3. GRANT OF MORTGAGE & SECURITY INTEREST

3.1 Grant. Borrower grants Lender a mortgage lien on Borrower’s interest in the Property, with a power of sale exercisable only as permitted by Applicable Law, to secure the prompt payment and performance of the Secured Obligations.

3.2 Security Lien; Future Advances. This Agreement creates a lien as security and transfers no title to Lender (Cal. Civ. Code § 2888). It also secures future advances to the extent permitted by Cal. Civ. Code § 2884 and the stated Secured Obligations.

3.3 Fixture Filing & Security Agreement.
a. This Agreement constitutes a “fixture filing” covering the Property’s fixtures, as contemplated by Cal. Com. Code §9502(c).
b. Borrower authorizes Lender to file UCC financing statements describing the collateral as “all fixtures and personal property associated with the real property described in the Mortgage recorded contemporaneously herewith.”

4. SECURED OBLIGATIONS

4.1 Payment Terms. Principal and interest shall be paid in accordance with Section 2 of the Note. If any payment is due on a non-business day, payment shall be due on the next business day without additional interest.

4.2 Default Interest & Late Charges. A default does not automatically increase the rate on the entire unpaid principal balance. Any default interest or late charge applies only as provided in the Note and only to the extent enforceable under California law, including Cal. Civ. Code § 1671.

4.3 Prepayment. [PREPAYMENT TERMS OR “None.”]

5. REPRESENTATIONS & WARRANTIES

Borrower represents and warrants to Lender on the Effective Date and continuing:

5.1 Authority; Enforceability. Borrower is duly organized, validly existing, and in good standing under the laws of its jurisdiction and has full power to execute and deliver this Agreement.

5.2 Title. Borrower holds indefeasible fee simple title to the Property, subject only to Permitted Encumbrances.

5.3 Compliance. The Property and its current use comply in all material respects with Applicable Law, including zoning and environmental laws.

5.4 No Litigation. Except as disclosed on Schedule 2, no litigation or proceeding is pending or, to Borrower’s knowledge, threatened that would materially adversely affect Borrower or the Property.

5.5 Financial Statements. All financial information delivered to Lender is true, correct, and complete in all material respects.

5.6 Survival. These representations and warranties survive closing and shall not be affected by investigation made by Lender.

6. COVENANTS & RESTRICTIONS

Borrower covenants and agrees until the Secured Obligations are indefeasibly paid in full:

6.1 Payment & Performance. Borrower shall pay and perform all Secured Obligations when due.

6.2 Taxes & Assessments. Borrower shall pay before delinquency all taxes, assessments, and charges levied on the Property, subject to a good-faith contest with adequate reserves.

6.3 Insurance.
a. Maintain hazard insurance on the improvements in an amount equal to their replacement value, naming Lender as mortgagee/loss payee via ISO Form 438BFU or equivalent. Lender shall not require coverage exceeding that replacement value as a condition of this loan (Cal. Civ. Code § 2955.5(a)).
b. As soon as practicable, and before execution of the Note or security documents, Lender shall disclose the coverage limit in § 2955.5(a) to Borrower in writing.
c. Maintain liability insurance with limits of not less than $[AMOUNT] per occurrence.

6.4 Maintenance. Keep the Property in good repair and condition, free from waste; promptly complete any restoration.

6.5 Transfer Restrictions. Except with Lender’s prior written consent, Borrower shall not (a) transfer any interest in the Property, (b) create subordinate liens, or (c) permit a change of control.

6.6 Environmental. Except as disclosed in the Phase I Report dated [DATE], no Hazardous Materials are present in violation of Applicable Law. Borrower shall remediate any release in compliance with Applicable Law.

6.7 Books & Inspection. Maintain complete books and allow Lender or its agents reasonable access to the Property and records upon two business days’ notice.

6.8 Notice of Material Events. Borrower shall promptly notify Lender of (a) any Event of Default, (b) any litigation exceeding $[AMOUNT], (c) any material casualty or condemnation, or (d) any governmental notice concerning the Property.

7. DEFAULT & REMEDIES

7.1 Events of Default.
a. Failure to pay any monetary Secured Obligation within five (5) days after due.
b. Failure to perform any non-monetary covenant within thirty (30) days after written notice (ten (10) days if curable by payment of money).
c. Any representation proves materially false.
d. Insolvency, bankruptcy, assignment for benefit of creditors, or appointment of a receiver.
e. Attachment, levy, or seizure of the Property or any material portion thereof.

7.2 Notice & Cure. Lender shall give the written default and cure notices required by this Agreement and the law governing the foreclosure method selected. The statutory notice-of-default process under Cal. Civ. Code § 2924 applies to a nonjudicial power-of-sale foreclosure; a judicial foreclosure proceeds through a court action and its applicable pleading and service rules.

7.3 Remedies. Upon an Event of Default and expiration of any required cure periods, Lender may:
a. Accelerate all Secured Obligations.
b. Commence a judicial foreclosure action and seek a court decree of sale; or, if this instrument grants a power of sale and the law permits its use, proceed through the nonjudicial power-of-sale process.
c. Pursue a receiver to collect rents and profits.
d. Exercise all rights of a secured party under the UCC.
e. Offset any obligations of Lender to Borrower.
f. Recover all costs of enforcement, including reasonable attorneys’ fees.

7.4 Foreclosure Procedure (California-Specific).
a. Non-Judicial. If Lender elects power-of-sale foreclosure, the authorized party shall first satisfy any applicable borrower-contact and due-diligence requirements. Where Cal. Civ. Code §§ 2923.5, 2924.15, and 2924.18(b) apply, wait at least 30 days after initial borrower contact or completion of the specified due diligence and include the required contact declaration in the Notice of Default. The authorized party shall record the Notice of Default under § 2924. Ordinarily, not less than three months must elapse before a notice of sale is given; § 2924(a)(4) permits recordation of that notice up to five days earlier only if the sale date is at least three months and 20 days after the Notice of Default was recorded. Give the sale notice as required by §§ 2924 and 2924f. For a covered monetary default, the statutory reinstatement right under § 2924c generally runs until five business days before the scheduled sale, subject to its postponement and later-notice rules. Conduct any sale under the applicable statutory procedures.
b. Judicial. If Lender elects judicial foreclosure, Borrower retains a statutory right of redemption for three (3) months after sale if the proceeds satisfy the debt, or one (1) year if they do not, under Cal. Code Civ. Proc. §729.030, in any case in which the foreclosure decree determines that a deficiency judgment may be ordered against Borrower pursuant to Cal. Code Civ. Proc. §726(b); if a deficiency judgment is waived or prohibited, the Property is sold free of any right of redemption.

7.5 Deficiency Judgment Rules.
a. Anti-Deficiency. Lender shall not seek or collect a deficiency where Cal. Code Civ. Proc. § 580b applies. This includes a mortgage given to the seller to secure the unpaid balance of the purchase price of real property, without a one-to-four-family dwelling condition; a qualifying purchase-money loan from another lender on a dwelling for no more than four families occupied in whole or part by the purchaser; and a covered refinance of such a purchase-money loan, except for new principal advanced for purposes outside the original purchase-money obligation and permitted transaction costs. Apply § 580b(b)'s payment-allocation and January 1, 2013 transaction-date rules to any refinance.
b. Non-Judicial Bar. If Lender forecloses non-judicially, no deficiency shall be sought pursuant to Cal. Code Civ. Proc. §580d.
c. Guaranties. Any separate guaranty shall contain waivers sufficient to permit post-foreclosure recovery to the maximum extent permitted by law.

8. RISK ALLOCATION

8.1 Indemnification. Borrower shall indemnify, defend, and hold harmless the Indemnified Parties from any claim, loss, damage, liability, or expense (including reasonable attorneys’ fees) arising out of or related to (a) the Property or its operation, (b) breach of this Agreement, or (c) presence or release of Hazardous Materials, except to the extent caused by the gross negligence or willful misconduct of the Indemnified Parties.

8.2 Limitation of Liability. Notwithstanding anything herein to the contrary, the maximum aggregate liability of Borrower to Lender shall not exceed the Secured Obligations outstanding at the time the claim accrues.

8.3 Force Majeure. Performance (other than payment) is excused during the period and to the extent prevented by war, terrorism, epidemic, natural disaster, or act of governmental authority, provided Borrower gives notice within ten (10) days and resumes performance promptly thereafter.

9. DISPUTE RESOLUTION

9.1 Governing Law. This Agreement and the Secured Obligations shall be governed by and construed in accordance with the laws of the State of California, without regard to conflict-of-laws principles.

9.2 Forum Selection. Each party submits to the exclusive jurisdiction of the state courts located in [COUNTY], California, and waives objections to venue based on forum non conveniens.

9.3 Arbitration Excluded. The parties expressly agree that Section 9.2 is the sole dispute resolution mechanism; arbitration is excluded.

9.4 Jury Waiver. [INTENTIONALLY OMITTED — Under Cal. Code Civ. Proc. §631 and Grafton Partners L.P. v. Superior Court, 36 Cal.4th 944 (2005), a pre-dispute contractual waiver of the right to a civil jury trial is unenforceable in California courts; the only statutorily authorized pre-dispute means of avoiding a jury are an agreement to arbitrate (Cal. Code Civ. Proc. §1281) or a stipulation to judicial reference (Cal. Code Civ. Proc. §638), neither of which this Agreement adopts.]

9.5 Preservation of Foreclosure Remedy. Nothing herein shall impair Lender’s right to seek injunctive relief, appointment of a receiver, or foreclosure under this Agreement.

10. GENERAL PROVISIONS

10.1 Amendments & Waivers. No amendment or waiver is effective unless in a writing signed by the party to be charged. A waiver on one occasion is not a waiver of any future default.

10.2 Assignment. Lender may assign or participate its interest without Borrower’s consent; Borrower may not assign this Agreement without Lender’s prior written consent.

10.3 Successors & Assigns. This Agreement binds and benefits the parties and their respective successors and permitted assigns.

10.4 Severability. Any unenforceable provision shall be severed and the remaining provisions enforced to the fullest extent permitted.

10.5 Integration. This Agreement, the Note, and the other loan documents constitute the entire agreement and supersede all prior agreements.

10.6 Counterparts; Execution for Recording. This Agreement may be executed in counterparts, which together constitute one instrument. An electronic signature alone does not satisfy the separate acknowledgment required to record this mortgage. Use a signature and acknowledgment method accepted by the county recorder under applicable law before submitting the instrument for recording (Cal. Gov. Code § 27287; Cal. Civ. Code § 1189).

10.7 Recording. Borrower authorizes Lender to record this Agreement and any modification in the official records of the county where the Property is located.

10.8 Notices. All notices shall be in writing and delivered by (a) personal delivery, (b) certified U.S. Mail (return receipt requested), or (c) nationally recognized overnight courier to the addresses in Section 1.1, and deemed given upon receipt or refusal.

11. EXECUTION BLOCK

IN WITNESS WHEREOF, the parties have executed this Mortgage and Security Agreement as of the Effective Date.

BORROWER:
☐
By: _______________________
Name: _____________________
Title: ______________________

LENDER:
☐
By: _______________________
Name: _____________________
Title: ______________________

NOTARY ACKNOWLEDGMENT

[Insert California all-purpose acknowledgment (Cal. Civ. Code §1189) with proper venue, notary signature, and seal.]

12. EXHIBITS & SCHEDULES

• Exhibit A – Legal Description of Property
• Schedule 1 – Permitted Encumbrances
• Schedule 2 – Pending Litigation (if any)

© [YEAR] [LAW FIRM / PREPARER]. All rights reserved.