A business owner that defaults on mortgage payments for his commercial or retail property faces the prospect of foreclosure by the lender. Commercial foreclosures are similar to residential foreclosures in many respects. For both types of properties, the laws of the state in which the property is located determine whether the process will be a judicial or nonjudicial foreclosure. A nonjudicial foreclosure can take place when the state permits it and the loan forms contain a power of sale clause.
In either a judicial or nonjudicial foreclosure, the property is sold at a foreclosure sale with the proceeds satisfying the outstanding mortgage debt. If there is no bidder, the lender can bid on the property, which is known as a credit bid. Alternatively, defaulting borrowers or those who are on the verge of defaulting can attempt to negotiate with the lender in the hopes of avoiding foreclosure.
Borrowers who choose to negotiate with lenders should try to do so early in the process. A compromise between the parties may entail a forbearance plan to allow a defaulting borrower to catch up on payments. Alternatively, the parties may agree to a mortgage modification that amends the loan amount or extends the term to repay the loan to allow the borrower to resume his mortgage obligations.
While the basic process of foreclosure for commercial and residential properties are similar, there are some unique aspects of a commercial foreclosure. In a commercial property foreclosure, the property owner may retain possession of the business during the foreclosure process. This is the case so long as the owner does nothing to lower the value of the asset securing the loan. However, the lender can request that a receiver be appointed in the event that the borrower does not properly care for the property and the value of the asset starts to decline. The receiver manages the property until a foreclosure sale occurs. This entails collecting rents and profits to help lower the mortgage obligation. The receiver can play other roles as well upon request of the lender. In some cases, the receiver can be responsible for selling the property in lieu of foreclosure if all the parties agree to a sale.
The experienced team of attorneys at the Law Offices of Mark Weinstein, P.C. can help you litigate your real estate claims. Contact Mark Weinstein and his colleagues at (770) 888-7707 or visit them at https://www.markweinsteinlaw.com to find out how they can advise you.