Insuring a Fee Transaction after a Synthetic Lease Transaction

Whenever an agent is requested to insure a conveyance of property which has been the subject of a Synthetic Lease Transaction, consideration must be given to the elimination of any potential interests or liens created by that transaction. 


In order to vest unencumbered title, the following documents should be executed and recorded: 


1.  Deed from the SPE fee owner/mortgagee with the joinder of the lessee/real owner. 

2.  Termination of the leasehold interest created by the synthetic lease. 

3.  Release, discharge, or satisfaction of the fee mortgage created by the synthetic lease. 


Unless these documents are executed and recorded, a future bankruptcy of either the SPE or lessee could result in a claim under the policy insuring the new owner. The trustee in bankruptcy would be in a position to assert that the absence of recorded termination documents results in either an outstanding interest in or a lien on the property.