What's Now in Real Estate Finance (July 2026)

Topics from our July agenda included:

New York Challenges “Deed-in-a-Box” Enforceability
Mitchell Kaplan (New York) and Ben Nitzani (New York)

A recent decision from the New York County Supreme Court (Commercial Division), Shanghai Commercial Bank Ltd. v. New Tent, LLC, spoke to the enforceability of a so-called deed-in-escrow or “deed-in-a-box” arrangement sometimes contemplated in loan workout and forbearance situations. In these arrangements, borrowers place a deed and related transfer documents into escrow, allowing a lender to obtain title to the property if conditions specified in forbearance agreements are not satisfied, rather than going through a full judicial foreclosure and sale proceeding.

The court held that the deed functioned as additional security for the loan and therefore should be treated as an equitable mortgage under New York law, requiring the lender to pursue a traditional foreclosure process rather than obtain title through escrow. The discussion highlighted the decision’s potential impact on workout negotiations and reinforced the need for lenders to view deed-in-a-box arrangements as potentially vulnerable to challenge, particularly in light of New York’s longstanding protections surrounding borrowers’ equitable right of redemption. Read more in Seyfarth’s recent legal update.

Pre-Closing Development Activity in Texas Construction Loans
Chris Manzer (Seattle) and Megan Vallerie (New York)

The team discussed challenges that can arise when construction or site work begins before a Texas construction loan closes. Because Texas mechanic’s lien laws can grant priority dating back prior to the recording of a deed of trust, lenders face heightened risks if pre-development activities occur before the deed of trust is recorded.

The discussion highlighted several approaches lenders may use to preserve lien priority. The discussion also noted that if construction has already begun, resolving lien-priority concerns can require more complex and time-consuming solutions that may delay closing.

Lost Notes and Foreclosure Enforcement Considerations in New York
Dan Evans (New York)

We reviewed practical considerations for lenders seeking to amend, restate, or consolidate loans when one or more original promissory notes have been lost. Under New York law, lenders pursuing a foreclosure action generally must establish ownership and possession of the underlying note, making documentation of the note history particularly important where original loan documents are unavailable.

The discussion focused on measures lenders can take to preserve enforceability. These steps can help mitigate foreclosure risk and facilitate enforcement efforts when original promissory notes cannot be produced.