Legal Description

A legal description is the formal method of identifying a specific parcel of real property in a way that is recognized by law and distinguishes it from every other piece of land. Unlike a street address -- which is a postal convenience -- a legal description defines the exact boundaries of the property and is the description used in deeds, mortgages, deeds of trust, and all other recorded instruments that transfer or encumber real property.

Why Legal Descriptions Matter to Note Investors

When you purchase a mortgage note, you are acquiring a debt obligation secured by a specific piece of real property. The legal description in the mortgage or deed of trust is what ties your lien to that property. If the legal description is incorrect, incomplete, or does not match the property the borrower actually occupies, your security interest may be defective.

During collateral file review, note investors verify that the legal description at the end of the mortgage corresponds to the correct property address. A mismatch between the legal description and the property can:

• Prevent or delay foreclosure
• Create a cloud on title that complicates resale
• Invalidate title insurance coverage
• Raise questions about whether the loan is properly secured

Types of Legal Descriptions

There are three primary systems used to describe real property in the United States. The system used depends on the state, the age of the property records, and local convention.

Metes and Bounds

The oldest system, used primarily in the original thirteen colonies and states east of the Mississippi. Metes and bounds descriptions define a property by starting at a fixed point of beginning (POB) and tracing the boundary lines using compass directions and distances.

Metes and bounds descriptions can be lengthy and complex, especially for irregularly shaped parcels. They are the most common type you will encounter on older loans in eastern states.

Lot and Block (Recorded Plat)

The most common system in modern residential subdivisions. When a developer subdivides land, a plat map is recorded with the county showing each lot, block, and the subdivision name. The legal description then references the recorded plat rather than describing every boundary.

Example: "Lot 14, Block 3, Sunrise Estates, as recorded in Plat Book 42, Page 17, of the Public Records of Orange County, Florida."

This system is concise and easy to verify -- you can look up the referenced plat book and page in county records to confirm the exact boundaries.

Government Survey (Rectangular Survey / PLSS)

Used in most states west of the Mississippi and established by the Public Land Survey System (PLSS). This system divides land into a grid of townships, ranges, and sections based on principal meridians and baselines.

Example: "The Northwest Quarter of Section 12, Township 3 North, Range 5 East of the Third Principal Meridian."

Each section is one square mile (640 acres), and properties are described as fractional parts of a section. This system is common on rural properties and larger parcels in western and midwestern states.

Verifying the Legal Description During Due Diligence

During due diligence, cross-reference the legal description from the mortgage against at least one independent source:

• County assessor records -- The assessor's office maintains the legal description tied to each parcel identification number (PIN or APN)
• Title search or O&E report -- A title search will show the legal description from the most recent deed of record
• County GIS or mapping tools -- Many counties offer free online parcel maps that display the legal description and property boundaries

If the legal description in the mortgage does not match the property identified in the data tape, flag it immediately. This could indicate a clerical error at origination, a property that has been subdivided or recombined since the loan was originated, or -- in rare cases -- a loan that was never properly secured against the intended property.

Common Issues

A defective legal description does not always mean a deal is dead. Minor errors can often be corrected with a scrivener's affidavit or corrective instrument. But significant defects -- such as a legal description that describes an entirely different property -- are a reason to walk away from a loan during due diligence.