Key Takeaways
- Tennessee is a "title theory" state where the lender holds legal title until the loan is paid off
- Tennessee uses deeds of trust instead of mortgages for security instruments
- The power of sale clause allows non-judicial foreclosure in Tennessee
- Tennessee recognizes tenancy by the entirety for married couples
- Homestead exemption in Tennessee protects up to \$5,000 (individual) or \$7,500 (family) of home equity
Tennessee Property Law
Tennessee has specific property laws that real estate professionals must understand.
Title Theory State
Tennessee is a "title theory" state for lending:
| Aspect | Description |
|---|---|
| Legal title | Held by lender (trustee) during loan term |
| Equitable title | Held by borrower |
| Upon payoff | Legal title transfers to borrower |
Key Distinction: In "lien theory" states, the borrower holds legal title and the lender has a lien. Tennessee follows title theory.
Deeds of Trust
Tennessee primarily uses deeds of trust instead of mortgages:
Three-Party Structure
| Party | Role |
|---|---|
| Trustor | Borrower (gives the deed) |
| Beneficiary | Lender (receives benefit) |
| Trustee | Neutral third party (holds title) |
Power of Sale
The deed of trust includes a power of sale clause that:
- Allows non-judicial foreclosure
- Trustee can sell property without court action
- Faster and less expensive than judicial foreclosure
Types of Property Ownership
Concurrent Ownership
| Type | Description | Right of Survivorship |
|---|---|---|
| Tenancy in common | Unequal shares allowed, separate titles | No |
| Joint tenancy | Equal shares, four unities required | Yes |
| Tenancy by the entirety | Married couples only | Yes |
Important: Tennessee recognizes tenancy by the entirety for married couples, which provides enhanced creditor protection.
Homestead Exemption
Tennessee provides homestead protection for primary residences:
Exemption Amounts
| Category | Amount |
|---|---|
| Individual owner | $5,000 |
| Family (with minor children) | $7,500 |
| Joint owners (married) | $7,500 |
Note: Tennessee's homestead exemption is relatively modest compared to some states. It protects a portion of home equity from unsecured creditors.
Requirements
- Must be owner's primary residence
- Must file homestead declaration
- Does not protect against mortgage foreclosure
Property Transfer
Types of Deeds
| Deed Type | Warranties |
|---|---|
| General warranty deed | Full warranties, best protection for buyer |
| Special warranty deed | Warranties limited to grantor's ownership period |
| Quitclaim deed | No warranties, transfers whatever interest exists |
Recording
| Requirement | Details |
|---|---|
| Where | County Register of Deeds office |
| Purpose | Provides constructive notice |
| Priority | First to record generally has priority |
Foreclosure Process
Tennessee allows non-judicial foreclosure under the deed of trust:
Timeline (approximate)
| Step | Timeframe |
|---|---|
| Default | Borrower misses payments |
| Notice | 20 days before sale |
| Advertisement | Published in newspaper |
| Sale | Public auction |
| Deficiency | Lender may seek deficiency judgment |
Borrower Rights
| Right | Description |
|---|---|
| Reinstatement | Pay delinquent amount before sale |
| Redemption | Tennessee has limited post-sale redemption |
| Bankruptcy | May delay foreclosure |
Tennessee is considered what type of state regarding real estate lending?
What security instrument is primarily used in Tennessee real estate transactions?
What is the Tennessee homestead exemption amount for a family with minor children?
Which type of property ownership is available ONLY to married couples in Tennessee?