A novation replaces one contractual party with another and transfers rights and obligations; all affected parties must consent for the original party to be discharged from future liability.

Novation vs assignment?

An assignment transfers rights but generally leaves the assignor liable; novation substitutes the party and discharges the original obligor when all parties agree.

Can a novation be signed electronically?

Yes, electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted; confirm consumer-disclosure rules and lender acceptance for consumer- or finance-related novations.

Is notarization required?

Notarization is typically required when the novation affects recorded instruments; state rules vary, so verify county recorder requirements and witness counts before execution.

How is a novation recorded?

Record the executed, notarized instrument at the county recorder with the applicable fee and return instructions; recording places the change on public record and supports title continuity.

Can a novation be revoked?

Revocation generally requires consent of all parties or a contractual right to rescind; absent agreement, unilateral revocation may lead to breach claims or litigation.

Electronic Signature
Templates
Real estate
Real Estate Novation Agreement

Real Estate Novation Agreement

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REAL ESTATE NOVATION AGREEMENT

Parties

This Real Estate Novation Agreement (the "Agreement") is made and entered into effective as of by and among:

Original Party (Transferor) - Full legal name Original Party - Contact address New Party (Transferee) - Full legal name New Party - Contact address Counterparty to Original Agreement (Name for reference) Counterparty - Contact address

Property Identification

Property Address: Parcel / APN:

Legal Description of Property

Recitals

A. Original Party and Counterparty entered into a certain agreement dated (the "Original Agreement") concerning the Property identified above.

B. The parties desire that New Party succeed to and assume all rights, obligations and liabilities of Original Party under the Original Agreement and that Original Party be released from all further obligations under the Original Agreement, subject to the terms and conditions set forth in this Agreement.

Agreement

1. Novation and Release

Effective as of the Effective Date set forth above, Original Party hereby transfers, assigns and novates to New Party all of Original Party's rights and obligations under the Original Agreement. Counterparty acknowledges and consents to the novation to the extent required by the Original Agreement. Upon the Effective Date, Counterparty releases and forever discharges Original Party from any and all liabilities, claims and obligations arising under the Original Agreement that accrue on or after the Effective Date.

2. Assumption by New Party

New Party unconditionally assumes and agrees to perform all duties, covenants and obligations of Original Party under the Original Agreement arising on or after the Effective Date and to indemnify and hold Original Party and Counterparty harmless from any claim arising from New Party's breach of the Original Agreement after the Effective Date.

3. Consideration

In consideration of this novation and the mutual covenants herein, New Party shall pay to Original Party the amount of by means of on or before .

4. Lender or Third-Party Consent

The parties acknowledge that a mortgage, deed of trust or other encumbrance may encumber the Property. Lender consent required: Yes No

If consent is required, Lender name

5. Representations and Warranties

Each party represents and warrants to the others that: (a) it is duly organized and has full power and authority to enter into and perform this Agreement; (b) execution and delivery have been duly authorized; and (c) this Agreement constitutes a legal, valid and binding obligation enforceable in accordance with its terms.

6. Indemnity

New Party agrees to indemnify, defend and hold harmless Original Party and Counterparty from and against all losses, liabilities, damages and expenses (including reasonable attorneys' fees) arising from New Party's failure to perform obligations assumed under this Agreement following the Effective Date.

7. Escrow, Closing and Possession

If applicable, the parties agree that escrow shall be opened with: and closing shall occur on or before . Possession shall be delivered in accordance with the Original Agreement unless otherwise agreed in writing.

8. Defaults and Remedies

A breach of this Agreement by any party shall constitute a default. The non-defaulting party shall have the remedies provided under the Original Agreement and at law or in equity, including specific performance and recovery of damages and costs, including reasonable attorneys' fees.

9. Disclosures

The parties make the following disclosures regarding the condition of the Property:

Lead-based paint known: Yes No

Mold or moisture condition known: Yes No

Prior material damage or repair history: Yes No

If yes to any disclosure, describe details

10. Notices

All notices required or permitted under this Agreement shall be in writing and delivered to the addresses below by certified mail, overnight courier, or personal delivery, and shall be deemed given upon receipt.

Notice address for Original Party Notice address for New Party Notice address for Counterparty

11. Governing Law; Entire Agreement

This Agreement shall be governed by and construed in accordance with the laws of the state of . This Agreement, together with the Original Agreement as amended hereby, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings. No amendment shall be effective unless in writing and signed by all parties.

12. Miscellaneous

If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force and effect. The obligations of the parties hereunder are binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns. Each party shall execute and deliver such further instruments and take such actions as may be reasonably necessary to consummate the transactions contemplated by this Agreement.

Acknowledgment of Counterparty (for reference)

Counterparty acknowledges receipt of a fully executed copy of this Agreement and acknowledges that Counterparty's consent may be required under the Original Agreement. Counterparty:

Counterparty representative (print)

Counterparty consent provided: Yes No

Signatures

Original Party:

By:

Date:

New Party:

By:

Date:

What a Real Estate Novation Agreement Is

A Real Estate Novation Agreement is a legal instrument that replaces one contracting party with another and transfers all rights and obligations under an existing real estate contract. Unlike an assignment, a novation requires the consent of the original parties and the counterparty (for example, buyer, seller, and lender) so the replaced party is discharged from future liability. Novations are commonly used for loan substitutions, developer takeovers, or where a buyer wishes to step into an existing purchase contract and assume liabilities and benefits under the original agreement.

Why a Novation Matters in Real Estate Transactions

Novation provides a clean transfer of contractual duties and liabilities, prevents ongoing exposure for the original party, and clarifies who holds title, payment obligations, and performance duties going forward. It ensures all parties expressly consent to the change, which reduces disputes and facilitates clear recordation.

Who Typically Uses a Real Estate Novation Agreement

Real estate brokers, title companies, lenders, developers, and counsel use novations to restructure transactions when a party substitution is required.

Real estate developers reassign project contracts to new owners while preserving lender consents and subcontractor arrangements.
Lenders or loan servicers accept a replacement borrower to maintain loan performance and clear prior borrower liability.
Title companies and closing agents record the novation and confirm chain-of-title continuity for the transaction record.

Properly executed novations reduce post-closing disputes and avoid the ambiguity that can arise from informal assignments or unilateral changes.

Primary Signers and Their Roles

Loan Officer

A loan officer or lender representative must confirm consent to the new obligor and complete any required lender addenda; their authorization protects the lender's security interest and is often required for the novation to effectuate liability transfer.

Title Agent

The title agent or company reviews chain-of-title implications, records the instrument at the county recorder when necessary, and issues any required endorsements to guarantee marketable title after the party substitution.

Core Elements to Include in a Professional Novation

A properly drafted Real Estate Novation Agreement identifies the replaced party, the incoming party, the consent of all original counterparties, and the precise obligations being transferred to avoid ambiguity.

Parties

Full legal names and entity types for original party, incoming party, and remaining counterparty; include capacity (e.g., ‘‘as trustee’’) and business addresses to avoid identity disputes.

Referenced Contract

Clear citation of the original agreement by title, date, and docket or recording reference, plus a summary of the specific provisions and obligations that the novation modifies or replaces.

Transfer of Obligations

Explicit description of which liabilities, warranties, and future performance obligations are transferred to the incoming party and which, if any, remain with the original party.

Consent Clause

Unambiguous written consents from all affected parties, including lender approval language where mortgage or security interests are involved to ensure enforceability.

Release Language

Express release or discharge of the original party from future liabilities under the referenced contract, confirming that the incoming party assumes full responsibility.

Recording and Notices

Instructions for recordation, required notary/witness steps, and notice addresses to ensure public record clarity and proper service of subsequent communications.

Step-by-Step: How to Complete a Novation Agreement

Follow these practical steps to prepare, approve, and finalize a Real Estate Novation Agreement for recording and closing.

01

Prepare Draft: Reference the original contract and draft specific transfer language.
02

Obtain Consents: Secure written lender and counterparty approvals in signed form.
03

Execute and Notarize: All parties sign before a notary; include witness signatures if required.
04

Record & Distribute: Record where required and circulate executed copies to title and lender.

How to Configure an Electronic Novation Workflow

Set up a digital signing workflow that enforces party order, identity checks, and required fields to ensure a defensible, auditable record.

Field	Configuration
Signature Fields	Place required signature and date fields; make them mandatory.
Role Order	Set signer sequence: original party, lender, incoming party.
Authentication	Enable email plus SMS or KBA for higher assurance.
Audit Trail	Capture IP, timestamp, and actions for each signer.

Where to File and How the Routing Works

Routing and filing depend on whether the novation affects recorded instruments (deeds, mortgages) or solely internal contracts; follow the chain below.

Drafting: Prepare instrument referencing original agreement.
Signatures: Execute with required authentication and notarization.
Recording: Record at county recorder when deed or mortgage is altered.
Distribution: Send executed copies to lender, title insurer, and parties.

Digital Signing and Technical Requirements

Use an eSignature platform that supports auditable trails, notarization options, and common file formats to preserve enforceability and records.

File Types: PDF, DOCX supported
Authentication: Email, SMS, KBA options
Integrations: Salesforce, NetSuite, Box

Ensure the chosen platform complies with ESIGN and UETA, supports required authentication, and can produce a tamper-evident audit trail for each signed novation.

eSignature Vendor Pricing Snapshot for Novation Workflows

Comparison of typical vendor starting prices and core capabilities relevant to signing and retaining Real Estate Novation Agreements; signNow is listed first per platform ordering rules.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial	Varies by vendor	Varies by vendor	Varies by vendor	Varies by vendor
Bulk Send	Yes	Varies by plan	Varies by plan	Yes	Varies by plan
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No cap	100 envelopes/user/year	Varies by plan	Varies by plan	Varies by plan

Common Preparation Pitfalls to Avoid

Failing to obtain lender consent before substitution, which can leave the original obligor exposed to liability and the lender with unenforceable changes.
Using vague transfer language such as 'all obligations' without enumerating which warranties or indemnities move to the incoming party.
Recording incorrect or incomplete instruments at the county recorder, producing gaps in the chain of title and title insurance exceptions.
Neglecting proper notarization or witness formalities required by state law, leading to rejection by recorders or challenges during probate or sale.

Risks and Legal Consequences of an Incorrect Novation

Liability Exposure: Original party remains liable

Title Defects: Cloud on title risk

Recording Rejection: County may refuse recordation

Insurance Exceptions: Title endorsements may be denied

Regulatory Noncompliance: Lender/regulator enforcement risk

Costly Litigation: Potential for expensive disputes

Best Practices for Drafting and Executing Novations

Follow these practical tips to reduce risk and speed closing when substituting parties in real estate contracts.

Use Clear Reference Language

Cite the original agreement by title and date, and list exact sections being novated to avoid ambiguous scope of transfer and facilitate title review.

Get Written Lender Approval

Secure explicit lender consent with signatures on lender addenda where mortgages or security interests exist; oral or informal approvals are insufficient.

Confirm Notary and Witness Needs

Check county and state requirements for notary acknowledgements and witness counts before execution to prevent rejection at recording.

Maintain Audit Trails

For electronic workflows, preserve the audit trail showing signer identity, timestamps, and authentication method to support enforceability under ESIGN and UETA.

Notarization and Witness Steps for Recordable Novations

When a novation affects recorded instruments, follow this ordered checklist to satisfy recording and title requirements.

01

Prepare Final Document

Incorporate recording details and notary block.

02

Schedule Notary

Arrange in-person or RON if permitted.

03

Collect Witnesses

Provide required witnesses where state law requires them.

04

Execute with IDs

Signers present government ID to notary.

05

Notary Acknowledgement

Notary completes certificate and journal entry.

06

Record Instrument

File at county recorder with correct fees.

07

Obtain Recording Stamp

Keep stamped original or certified copies.

08

Distribute Copies

Send executed recorded copies to parties.

Novation Compared with Assignment and Amendment

A quick comparison of how novation differs from assignment and amendment helps choose the correct instrument for a party change or contractual modification.

Criteria	Novation	Assignment
Legal Effect	substitutes party	transfers rights only
Consent Required	yes, all parties	usually only one party
Liability Shift	original discharged	original may remain liable
Recording Needed	if instrument affects title	rarely required

Real-World Novation Scenarios

Practical examples show how novations resolve substitution needs while protecting stakeholders and title continuity.

Developer

A developer sells project obligations to a buyer after securing lender consent and title endorsements

Lender signs an addendum approving the substituted obligor
The novation is recorded and title insurer issues an endorsement confirming no new exceptions to title.

LoanAssume

A purchaser assumes a seller's mortgage with lender approval and signs a novation discharging the seller

The lender amends loan documents to list the new borrower
County recorder receives the instrument and the seller is released from future payment obligations.

FAQs — Common Questions About Novations

Answers to frequent questions about enforceability, recording, and electronic execution of Real Estate Novation Agreements.

Need help? Contact support

What is a novation?
A novation replaces one contractual party with another and transfers rights and obligations; all affected parties must consent for the original party to be discharged from future liability.
Novation vs assignment?
An assignment transfers rights but generally leaves the assignor liable; novation substitutes the party and discharges the original obligor when all parties agree.
Can a novation be signed electronically?
Yes, electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted; confirm consumer-disclosure rules and lender acceptance for consumer- or finance-related novations.
Is notarization required?
Notarization is typically required when the novation affects recorded instruments; state rules vary, so verify county recorder requirements and witness counts before execution.
How is a novation recorded?
Record the executed, notarized instrument at the county recorder with the applicable fee and return instructions; recording places the change on public record and supports title continuity.
Can a novation be revoked?
Revocation generally requires consent of all parties or a contractual right to rescind; absent agreement, unilateral revocation may lead to breach claims or litigation.

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