Defeasance Clause Law and Legal Definition

Defeasance clause is a provision in a mortgage deed that provides that the conveyance to the mortgagee will be ineffective if the mortgagor pays the debt on time. It permits the mortgagor to redeem his/her property upon the payment of the obligations to the mortgagee. Defeasance clauses are found in mortgages of the states that still follow the common-law theory of mortgages. This is not found in states which follow the lien theory. Lien theory refers to the concept that mortgage is a form of lien on the property, so the mortgagee acquires only a lien on the property and the mortgagor retains both legal and equitable title unless a valid foreclosure occurs.