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name: commercial-promissory-note language: en description: Drafts UCC-compliant U.S. Commercial Promissory Notes for commercial real estate finance transactions. Produces negotiable instruments with principal, interest, payment, default, and enforcement provisions protecting lender interests. Use when drafting promissory notes secured by real property, deed of trust, or mortgage in commercial lending. tags:

• agreement
• drafting
• transactional

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Commercial Promissory Note

Drafts a UCC Article 3–compliant Commercial Promissory Note for U.S. commercial real estate finance, structured to protect Payee/lender at negotiation and closing.

Prerequisites

Collect before drafting:

1. Parties — Full legal names, entity types, principal places of business for Maker (borrower) and Payee (lender)
2. Loan economics — Principal amount, interest rate (fixed or variable index + margin), day-count convention, maturity date
3. Payment structure — Installment amounts/frequency, interest-only period, balloon payment date
4. Security — Recording county/state, property address, legal description or reference to deed of trust/mortgage of even date
5. Governing law — Jurisdiction (required for usury and prepayment penalty compliance)
6. Prepayment terms — Permitted/prohibited, penalty schedule, exceptions (casualty, condemnation)

Quick Start

1. Gather all prerequisites above
2. Draft header with title PROMISSORY NOTE, principal in numerals and written form, execution date, city, state
3. Build sections per the template below
4. Run the verification checklist before finalizing

Sections

Section	Required Elements	Drafting Rules
Promise to Pay	Maker, Payee, "for value received," "to the order of"	Unconditional language only — conditions destroy UCC negotiability
Interest Rate	Rate (% p.a.), simple/compound, day-count (360 or actual/365), accrual start	Variable: SOFR index + margin, caps/floors, adjustment frequency; include usury savings clause
Payment Schedule	Payment count, amount/method, due date, commencement, maturity	Specify payment address/account; grace period before late charge
Application of Payments	Priority: (1) fees → (2) accrued interest → (3) principal	Address partial payments; flag negative-amortization risk if interest-only
Late Charges	Grace period (10–15 days typical), charge (4–5% of overdue or flat fee)	Must not exceed state maximum; acceptance ≠ waiver of default
Prepayment	Permitted/prohibited; partial/whole; penalty schedule; exceptions	Step-down if used (e.g., 3%/2%/1%); address casualty/condemnation proceeds
Events of Default	Monetary (payment failure + cure); non-monetary (covenant breach, bankruptcy, misrepresentation); cross-default	Monetary cure: 10 days written notice; non-monetary: 30 days; use objective triggers
Remedies / Acceleration	Optional acceleration of full balance + accrued interest; cumulative remedies	Non-exercise ≠ waiver; default interest rate if permitted; attorneys' fees as secured obligation
Security Reference	Deed of trust/mortgage of even date; property address + county/state; recourse or non-recourse	Non-recourse carve-outs: fraud, environmental, waste, misapplication of rents
Maker Waivers	Presentment, demand, notice of dishonor, protest, notice of default/acceleration	Bold or ALL CAPS per state conspicuousness rules; waive right to require Payee to proceed against collateral first
Attorneys' Fees	Prevailing party: reasonable fees + costs (trial, appeal, bankruptcy, collection)	Fees = secured obligation; check state mandatory-mutuality rules
General	Governing law, severability, successors/assigns, written amendment only, notice provisions, time-is-of-the-essence, integration	No Maker setoff/counterclaim unless negotiated
Signature Block	Entity: legal name + "By:" + signatory name/title + date; Individual: signature + name + date	Confirm signatory authority; joint Makers = joint and several; counterparts clause

Verification Checklist

Run before finalizing:

• Promise is unconditional and payable "to the order of" (UCC Art. 3 negotiability)
• Interest rate ≤ governing state usury ceiling — [VERIFY state-specific limit]
• Usury savings clause included (excess interest → applied to principal or refunded)
• Day-count convention stated explicitly (360 or actual/365)
• Variable rate uses SOFR (not LIBOR) with publication source and fallback language
• Prepayment penalty complies with governing state rules — [VERIFY state restrictions]
• Non-recourse carve-outs (if applicable) are enumerated explicitly, not vague
• Terms align with related deed of trust/mortgage, loan agreement, and guaranty
• Cross-default provisions mirrored across all security documents
• If any Maker is an individual, confirmed TILA/Reg Z/state consumer statutes do not apply (skill targets commercial transactions only)