In general, an exculpatory clause is a clause that eliminates a partys liability for damages caused by a breach of contract. A common type of exculpatory clause involves limiting liability on a loan to the collateral. In other words, if there is a default, the contract says that the damages will be limited to execution on the collateral (i.e., foreclosure on the property covered by the mortgage or deed of trust).
Florida Exculpatory Clause or Nonrecourse Provision in Mortgage regarding Deficiency Judgment In Florida, an Exculpatory Clause or Nonrecourse Provision in a mortgage is a legal provision that limits the lender's ability to seek a deficiency judgment against the borrower in the event of a foreclosure. This clause provides certain protections for borrowers by preventing the lender from pursuing them for any remaining balance on the mortgage after a foreclosure sale, also known as a deficiency. Different Types of Florida Exculpatory Clause or Nonrecourse Provision in Mortgage regarding Deficiency Judgment: 1. Full Recourse Mortgage: In a full recourse mortgage, the borrower is personally liable for the full amount of the mortgage debt, including any deficiency resulting from foreclosure. This type of mortgage does not contain an exculpatory clause or nonrecourse provision, allowing the lender to pursue the borrower for the outstanding balance. 2. Limited Recourse Mortgage: Some mortgages may include a limited recourse provision, also known as a partial nonrecourse provision. Under this provision, the borrower may be liable for a portion of the deficiency in case of a foreclosure. The lender can seek the outstanding balance beyond the value of the property through legal means. 3. Nonrecourse Mortgage: The most favorable form of protection for borrowers is a nonrecourse mortgage. In this type of mortgage, the lender is limited to recovering the property securing the loan in the event of foreclosure. The lender cannot pursue the borrower personally for any deficiency arising from the foreclosure sale. It is important for borrowers to carefully review their mortgage agreement, specifically looking for any exculpatory clauses or nonrecourse provisions. Consulting with a qualified real estate attorney in Florida is advisable to fully understand the implications and protections offered by these clauses. However, it is worth noting that even in cases where a nonrecourse provision exists, there are exceptions. For example, if the borrower engages in fraudulent activity or voluntarily damages the property, the lender may have grounds to pursue a deficiency judgment despite the nonrecourse provision. In summary, a Florida Exculpatory Clause or Nonrecourse Provision in a mortgage regarding deficiency judgment determines the extent to which a lender can seek the remaining balance from a borrower after a foreclosure. Full recourse mortgages hold the borrower fully liable, limited recourse mortgages allow partial liability, and nonrecourse mortgages provide the most protection by preventing any personal pursuit for deficiency judgments.
