What Makes a Note Enforceable
The essentials are few, namely the parties, the principal amount, the interest rate, a maturity date with a repayment schedule, and the borrower’s signature. Witnesses and a notary are not required for the note itself, though a notarized signature is harder to disavow later. The formalities arrive with security, because a mortgage on Florida real property needs two witnesses and a notary and must be recorded in the county where the land sits.
Beyond the essentials, a note earns its keep in the clauses people skip. An acceleration clause lets the lender call the whole balance when a payment is missed, instead of suing installment by installment. An attorney’s-fee clause decides who funds the collection fight. A prepayment provision avoids an argument nobody priced. And the note only proves a loan if the loan behaves like one, so keep records of every payment received, because a written note nobody ever collected on starts to look like something other than a loan, a problem that matters enormously in the family context below.
The Doc Stamp Trap
Florida taxes promissory notes themselves, at 35 cents per $100 of the obligation. An unsecured note’s tax is capped at $2,450, a ceiling reached at $700,000 of principal, so a $100,000 family loan owes $350 and a $1 million unsecured note owes the same $2,450 as a $700,000 one. When the note is secured by a mortgage on Florida real property, the tax is paid on the mortgage at recording, with no cap, plus a separate one-time intangible tax of about $2 per $1,000 of the secured amount. The tax is due whether or not the note is ever recorded, which is precisely why private and family lenders miss it.
The consequence is the part almost nobody knows. Florida appellate courts have held that an untaxed note cannot be enforced until the tax is paid, and one reversed a final judgment on a $1.9 million note on that ground alone. Another district has read the statute more narrowly for unsecured notes, so outcomes can vary with the courthouse, but a lender whose recovery depends on winning that argument has already lost something. The defect is curable, since paying the tax plus penalties restores the note’s day in court, and for an unrecorded note the payment goes directly to the Department of Revenue. The clean practice costs a few hundred dollars at signing and removes the borrower’s cheapest defense.
Usury: Where 18 Percent Becomes a Problem
For loans of $500,000 or less, Florida draws the civil line at the equivalent of 18 percent per annum simple interest. Above $500,000 the civil ceiling drops away and only the criminal lines remain, with willfully charging above 25 percent a crime and above 45 percent a felony. The civil penalty has real teeth. A willful violation forfeits the entire interest on the loan, and usurious interest already collected comes back to the borrower doubled.
The traps live in the arithmetic. Florida measures the rate on everything the lender takes, spreading origination fees, points, and similar charges over the stated term of the loan, so a 15 percent note with a large upfront fee on a twelve-month term can be usurious even though the stated rate never moved. Default-rate escalations, shortened terms, and compounding can each push a lawful deal over the line, and equity kickers and profit participations have their own case law. Private lenders should also know the flip side, which is that a borrower who spots usury holds a defense that can erase every dollar of the lender’s return. We run the math before anyone signs.
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Most family loans start as love and end as accounting. The clean structure is a real note with a fixed repayment schedule, interest at or above the applicable federal rate, the minimum family-loan rate the IRS publishes monthly, and records of actual payments. Charge less and federal tax law treats the forgone interest as a gift from you to the borrower while taxing you on interest you never received. Small loans get breathing room, since aggregate loans of $10,000 or less generally escape the rule and loans up to $100,000 face only a lighter version tied to the borrower’s investment income, but the published rate is modest and charging it makes the whole issue disappear. Our gift tax calculator shows what the gift side of the ledger looks like when you would rather give than lend.
The reason to insist on paper is what happens years later. In an estate, the unpaid balance is an asset, and an undocumented loan invites the fight over whether it was a loan, a gift, or an advance on the inheritance, a fight between siblings that routinely costs more than the loan. The law presumes family transfers are gifts unless the loan was genuine, documented, and collected. If you intend to forgive the debt at death, forgive it in the will, never in the note itself. For Medicaid, the stakes sharpen further. Florida looks back five years, an undocumented loan reads as a penalized gift, and only a note built to the federal rule, term within the lender’s life expectancy, equal payments with no deferral and no balloon, no cancellation at death, stays out of the penalty column. The same document done two ways produces opposite results, which is the entire argument for doing it once, properly.
Secured or Unsecured
An unsecured note is a promise backed by a lawsuit. A secured note is a promise backed by property, which changes the borrower’s incentives and the lender’s recovery. For real estate the instrument is a mortgage, executed with the formalities above and recorded where the land sits. For business assets, equipment, or receivables, the lender files a UCC-1 financing statement, the public claim ticket explained on our UCC filing page, and priority goes to whoever filed first, so timing is part of the deal.
The trade is not free. Real-property security surrenders the $2,450 cap, since the mortgage is taxed without a ceiling and picks up the intangible tax besides, so securing a $700,000 loan with Florida land adds thousands in transaction tax in exchange for collateral. Security also strengthens the loan’s credibility in the family context, where a mortgage recorded against the child’s house is persuasive evidence that everyone meant it. Which side of the trade to take depends on the borrower, the number, and how much of your outcome you are willing to leave to a future judgment, and it is a decision to make at drafting, not at default.
For Private Lenders
A private lending practice lives and dies on its paper. We draft and review notes, mortgages, guarantees, and modification agreements for individuals and family offices lending their own funds, with the stamp tax paid correctly, the usury math checked, and the default remedies actually usable when the borrower stops answering the phone. When a loan goes bad, collection and workout run through our business litigation practice, and the notes we drafted tend to make that conversation short. The path usually starts with a demand letter, runs through a suit on the note, and ends with the tools in our guide to collecting a judgment in Florida. And when you would rather cash out than collect, selling the note has its own playbook and its own traps.
Foreign lenders have an additional structural opportunity. Interest paid to a qualifying foreign lender can escape US withholding entirely when the loan is papered to the portfolio-interest rules from the outset, and for a non-US person, lending against Florida real estate rather than owning it sidesteps estate-tax exposure the ownership route carries. The structure is explained on our portfolio interest exemption page, and it only works if the documents are right before the first payment, which is one more version of this page’s theme.
What It Costs
Note packages are flat-fee, quoted up front once we know the loan size, the security, and the family or business context, with the documentary stamp math included so the tax gets paid and proven at signing. Government costs, including recording fees and the stamp and intangible taxes themselves, are additional and passed through at cost. Disputes over existing notes, collections, and workouts are quoted at the consult after we read the paper. The 30-minute consult is free either way, and bringing the draft or the term sheet makes it count double.
Frequently Asked Questions
Does a Promissory Note Need to Be Notarized in Florida?
No. A note is enforceable with the essential terms and the borrower’s signature; witnesses and a notary are optional, though notarization helps if the signature is ever disputed. The formalities shift when security enters the picture, because a mortgage on Florida real property must be signed with two witnesses and a notary and then recorded in the county where the land sits. The trap that actually catches people is not a missing notary but the unpaid documentary stamp tax.
How Much Is the Documentary Stamp Tax on a Promissory Note?
The rate is 35 cents per $100 of the amount borrowed, so a $100,000 note owes $350. For unsecured notes the tax is capped at $2,450, a ceiling reached at $700,000 of principal. When the note is secured by a mortgage on Florida real property, the tax is paid on the mortgage at recording with no cap, plus a one-time intangible tax of about $2 per $1,000 of the secured amount. The tax is due whether or not the note is ever recorded, which is the part that surprises private and family lenders.
Is a Promissory Note Enforceable if the Stamp Tax Was Never Paid?
Florida appellate courts have refused to enforce untaxed notes, and one reversed a judgment on a $1.9 million note for that reason alone, treating payment as a condition of using the courts. One district has disagreed as to unsecured notes, so the answer can depend on where suit is filed, and no lender wants their recovery to turn on that question. The defect is curable, since paying the tax with penalties restores enforceability, but the clean practice is to pay when the note is signed and keep the proof.
What Is the Highest Interest Rate I Can Charge in Florida?
For loans of $500,000 or less, anything above the equivalent of 18 percent per annum simple interest is usurious. Above $500,000, the civil ceiling falls away and the criminal thresholds govern, with willfully charging over 25 percent a crime and over 45 percent a felony. The rate is computed on everything the lender takes, since origination fees, points, and similar charges are spread over the stated term and counted, so a large fee on a short loan can blow through the cap even when the stated rate looks safe.
What Happens if a Loan Is Usurious?
A willful violation of the civil cap forfeits the entire interest on the loan, leaving the lender able to collect only the principal, and usurious interest already collected must be paid back double. Cross the criminal thresholds and the exposure stops being merely financial. Florida also gives lenders a narrow path to defuse the penalty by refunding an overcharge before the borrower acts on it. The sensible version of all this is a compliance check before signing, which takes minutes and costs almost nothing.
Can I Make an Interest-Free Loan to My Child?
You can, but federal tax law treats the interest you did not charge as a gift to the borrower and, above certain thresholds, taxes you on interest you never received. Charging at least the applicable federal rate, the minimum family-loan rate the IRS publishes monthly, avoids the whole problem. There is breathing room at the small end, since aggregate loans of $10,000 or less generally escape the rule and loans up to $100,000 get a lighter version tied to the borrower’s investment income. A written note at the published rate is the clean answer.
What Happens to a Family Loan When the Lender Dies?
The unpaid balance is an asset of the lender’s estate, which means the borrower child may owe the money to the estate, and effectively to their siblings. If forgiveness is the intent, it belongs in the will, not in the note, because a clause canceling the debt at death undermines the loan’s tax treatment and, for a Medicaid-planning note, destroys the federal exception that keeps the note from being a penalized transfer. An undocumented loan is worse still, inviting the gift-versus-loan fight that quietly consumes estates.
Does a Family Loan Affect Medicaid Eligibility?
It can, in either direction. Florida looks back five years at an applicant’s transfers, and an undocumented family loan is treated as a gift that triggers a penalty period. A note drafted to the federal rule, with a term inside the lender’s life expectancy, equal payments, no deferral or balloon, and no cancellation at death, is not a penalized transfer, which is why the paperwork quality decides the outcome. This is a place where a form off the internet and a properly drafted note produce opposite results.
Do I Need a Lawyer for a Promissory Note?
The form is simple; the surrounding law is not. Templates rarely mention the stamp tax that gates enforcement, the usury math that counts fees as interest, the witness and recording formalities that apply once a mortgage is involved, or the tax and Medicaid treatment of family loans. A note package is inexpensive legal work, priced flat and quoted up front, and it is cheaper than any single one of the problems it prevents.
Common Situations
The handshake that split three siblings. A father lends a son $250,000 for a house, no note, payments made irregularly in cash. At the father’s death, the other two children call it a loan owed to the estate; the son calls it a gift. Two years of probate litigation later, the settlement costs more than the interest a proper note would have charged, and the family does not gather for holidays anymore.
The term sheet at 22 percent. A private lender arrives ready to fund $400,000 at 22 percent with two points upfront, numbers a Florida court could read as forfeiting every dollar of interest. Restructured before signing, at a lawful rate with the fee treatment corrected and stamps paid, the loan closes on time, and when the borrower later defaults, the note performs in court instead of becoming the defense’s favorite exhibit.
The note that carried a Medicaid application. A mother’s application shows $120,000 that moved to her daughter over recent years. The transfers sit under a signed note with level monthly payments, interest at the published rate, and a bank record for every installment, so the state treats them as loan repayments rather than gifts, and no penalty period applies. The identical dollars without the paper would have bought months of ineligibility at the nursing home’s private rate.
Sources of Law
- Fla. Stat. §201.08(1)(a) (documentary stamp tax on notes: 35 cents per $100; $2,450 cap for unsecured notes); §201.08(1)(b) (tax on recorded mortgages without cap; when both a note and mortgage exist, the tax is paid on the mortgage at recordation); §199.133 (nonrecurring 2-mill intangible tax on obligations secured by Florida real property). Retrieved 2026-08-07.
- Somma v. Metra Electronics Corp., 727 So. 2d 302 (Fla. 5th DCA 1999) (payment of the documentary stamp tax is a condition of enforcing a note in Florida courts); WRJ Development, Inc. v. North Ring Ltd., 979 So. 2d 1046 (Fla. 3d DCA 2008) (tax must be paid, though payment after filing can suffice); but see Glenn Wright Homes (Delray) LLC v. Lowy, 10 So. 3d 693 (Fla. 4th DCA 2009) (contra as to unsecured notes).
- Fla. Stat. §§687.02 and 687.03 (contracts above the equivalent of 18 percent per annum simple interest are usurious for loans of $500,000 or less; all lender charges are spread over the stated term in computing the rate); §687.04 (willful violation forfeits all interest; usurious interest collected is repaid double); §687.071 (criminal usury: above 25 percent a second-degree misdemeanor, above 45 percent a third-degree felony).
- 26 U.S.C. §7872 (below-market loans: imputed gift and interest; the $10,000 and $100,000 exceptions at §7872(c)(2) and (d)(1)); 26 U.S.C. §1274(d) (applicable federal rates, published monthly); 42 U.S.C. §1396p(c)(1)(I) (Medicaid treatment of promissory notes: actuarially sound term, equal payments with no deferral or balloon, no cancellation at the lender’s death); Fla. Stat. §689.01 and §695.03 (execution and acknowledgment formalities for conveyances and recorded instruments, including mortgages).
Updated on August 7, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. General information about Florida law, not legal advice, and no attorney-client relationship is created. Outcomes depend on the specific facts; past results do not guarantee a similar outcome. Do not send confidential information until we have agreed to represent you.