Defease

Defease is a term that appears only infrequently in legal and financial writings. In contemporary practice, the concept it alludes to is more commonly described by the word defeasance, which denotes the cancellation or defeat of an obligation. When defease is encountered, it is typically considered an archaic or variant spelling of defeasance rather than a distinct concept.

In finance, defeasance refers to a mechanism by which an issuer funds a separate trust with assets sufficient to generate enough cash flow to satisfy all debt service on a security. Once the trust’s assets are arranged and the debt obligations are funded, the related liability is effectively removed from the issuer’s balance sheet. In some texts, the act of performing this arrangement might be described using the variant spelling defease, though such usage is rare and not standard.

In legal contexts, defeasance can also refer to clauses within contracts that cancel, suspend, or defeat certain covenants upon the occurrence of specified conditions. The terminology is technical and highly context-dependent, with defeasance being the preferred term in most modern documents.

Overall, defease is not widely used as a standalone term in current practice. When encountered, it is usually treated as a historical spelling variation of defeasance or as a typographical variant. For clarity, most writers use defeasance or related terms such as defeasible in contemporary legal and financial writing. See also defeasance, defeasible.