Tennessee Commercial Lending Law Ernest B. Williams, IV Michael B. Schwegler Ernest B. Williams IV, PLLC Nashville, Tennessee Contents I. Introduction . 2101 II. Basic Legal Structure . 2101 A. Constitution and Statutory Law . 2101 B. Administrative Law . 2102 C. Courts . 2102 D. Court Rules and Rules of Evidence . 2103 E. Local Law. 2103 III. Authority to Do Business and Taxation . 2103 A. Required Qualification to Do Business—The Tennessee Foreign Corporations and Limited Liability Companies Laws . 2103 B. Qualification to Do Business in Tennessee— Foreign Limited Partnerships. 2104 C. Licensing Requirements and Regulation of Financing . 2104 D. Taxation . 2105 IV. Interest and Usury; Promissory Notes. 2106 A. Compound Interest. 2106 B. Promissory Notes . 2106 C. Interest Versus Time-Price Differential . 2106 D. Usury; Interest Rate Limitations . 2107 1. Elements of a Usury Claim . 2107 2. Formula Interest Rate . 2107 3. Specific Usury Limits . 2108 4. Interest on Judgments . 2109 E. Loan and Other Charges4 (Generally) . 2109 F. Prepayment Premiums . 2109 G. Capitalization of Interest/“Spreading” . 2110 H. Equity Participations . 2110 I. Acceleration . 2110 J. Demand Notes . 2111 K. Application of Payments . 2112 2095 2096 Commercial Lending Law, Second Edition L. Interest Rate Not Stipulated . 2112 M. Post-Judgment Interest. 2112 N. Statutory Penalties; Excessive Interest and Charges . 2112 O. Interest Rate Choice of Law. 2113 P. Statute of Limitations. 2113 Q. Most Favored Lender Doctrines. 2113 V. Types of Borrowers . 2113 A. Corporations. 2113 B. Partnerships . 2114 C. Limited Liability Companies . 2115 D. Proprietorships and Individuals . 2117 1. Marital Property Laws . 2117 2. Property Held in Joint Tenancy with Right of Survivorship; Other Tenancies. 2117 3. Property Exempt from Claims of General Creditors . 2117 4. Age of Majority . 2118 E. Trusts and Estates. 2118 1. Trusts . 2118 2. Estates . 2118 VI. Real Estate Lending. 2118 A. Property Rights. 2118 1. Timber Rights . 2119 2. Mineral Rights . 2119 3. Water Rights . 2119 B. Leases. 2120 C. Condominiums . 2120 D. Types of Real Property Security Instruments. 2121 1. Deeds of Trust . 2121 2. Mortgages . 2122 3. Real Estate Installment Contracts . 2122 E. Formal Requirements of Deeds of Trust and Mortgages . 2123 1. Preparer Legend. 2123 2. Description of Property . 2123 F. Assignments of Leases and Rents . 2123 G. Recordation and Acknowledgments. 2124 1. Transfer and Recording Tax. 2124 2. Torrens System . 2126 3. Notary Acknowledgments . 2126 4. Recording Fees . 2126 H. Priority Issues. 2127 1. Future Advances . 2127 2. Modifications of Deeds of Trust and Mortgages . 2128 3. Purchase Money Priority . 2128 4. Priority of Options to Purchase . 2128 5. Priority of Rights of Reverter . 2128 Tennessee Commercial Lending Law 2097 6. Equitable Subrogation . 2128 7. Subordination Agreements . 2129 I. Title Insurance . 2129 J. Due on Sale/Due on Encumbrance Clauses . 2130 K. Transfer of the Mortgaged Property; Assumption Agreements . 2130 L. Transfer of Deeds of Trust and Mortgages. 2130 M. Cancellation of Deeds and Trust and Mortgages . 2130 N. Default and Foreclosure Remedies . 2131 1. Types of Foreclosure Proceedings . 2131 2. Receivership Provisions in a Deed of Trust. 2131 3. Deed of Trust Foreclosures Through Power of Sale . 2131 4. One-Action and Anti-deficiency Statutes . 2135 5. Statute of Limitations for Seeking Post-Foreclosure Deficiencies . 2136 6. Restraint of Trustee’s Sale . 2137 7. Irregularities in Trustee’s Sale; Post-Sale Matters. 2137 8. Junior Liens . 2137 9. Deeds in Lieu of Foreclosure. 2138 O. Environmental Indemnities . 2138 P. Mechanic’s Liens . 2138 Q. Collection of Property Tax and Insurance Impounds by Lenders . 2138 VII. Personal Property Lending and Equipment Leasing . 2139 A. UCC Article 9 (Generally) . 2139 B. Possessory Liens . ..