What alternative security instruments might Epcon Communities accept in place of a mortgage?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
In our sole discretion, we may accept or require a deed of trust, letter of credit, security agreement or other security instrument in substitution of a mortgage.
We may also require you to sign a security agreement granting us an interest in your personal property at your project (a form of security agreement is attached as Exhibit M to this disclosure document).
The security interests you grant to us, regardless if granted pursuant to a mortgage, security agreement, deed of trust, letter of credit or other security instrument (collectively referred to in this Item 10 as "Security Instruments"), may only be subject and junior to the mortgage or personal property lien(s) granted by you to lenders providing land acquisition and construction financing for your project.
You must reimburse us for all expenses and fees incurred by us in subordinating the Security Instruments at the same time you close on any financing with your lender or within 15 days of our delivering an invoice to you. You must reimburse us for all expenses and fees (including legal fees, and filing and recording fees) incurred by us in obtaining, filing and/or recording the Security Instruments.
Although we have never done so, we have the right to assign our interests in the Security Instruments to a third party without your consent. The third party may be immune under the law to any defenses to payment you may have against us. If the Security Instruments are assigned to a third party by us, as long as the Franchise Agreement is effective, we will remain primarily obligated to provide the assistance to you for which we are obligated under the Franchise Agreement.
Source: Item 10 — FINANCING (FDD pages 38–39)
What This Means (2025 FDD)
According to the 2025 FDD, Epcon Communities requires franchisees to provide a mortgage of at least $200,000 on the real property where the project will be constructed to secure the payment of all fees owed to them. The mortgage must be signed and delivered within 15 days after closing on the property purchase, or within 30 days of signing the Franchise Agreement if the franchisee already owns the property. However, Epcon Communities retains the discretion to accept alternative security instruments.
Specifically, in place of a mortgage, Epcon Communities may accept or require a deed of trust, a letter of credit, a security agreement, or another type of security instrument. Epcon Communities also has the option to require a security agreement granting them an interest in the franchisee's personal property at the project site. These security interests, regardless of the specific instrument used, can only be subject and junior to any liens granted to lenders providing land acquisition and construction financing for the project.
The franchisee is responsible for reimbursing Epcon Communities for all expenses and fees related to subordinating the Security Instruments and for all costs incurred in obtaining, filing, and/or recording these instruments. Epcon Communities also retains the right to assign its interests in the Security Instruments to a third party without the franchisee's consent. However, Epcon Communities remains primarily obligated to provide assistance under the Franchise Agreement even if the Security Instruments are assigned to a third party.
Prospective franchisees should note that while Epcon Communities typically requires a mortgage, they do provide some flexibility by allowing for alternative security instruments. Franchisees should discuss these options with Epcon Communities to determine the most suitable security arrangement for their specific circumstances, especially if a traditional mortgage poses challenges.