What to Expect During the Commercial Foreclosure Process

commercial business that was foreclosed

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Florida is a judicial foreclosure state, meaning that if a lender wants to foreclose on a property, they must file a lawsuit and secure a judgment from the court. This holds true for commercial properties as well. All foreclosures have certain potential complications, but commercial foreclosures are particularly complex. If you are in fear of foreclosure on your commercial property, there are some things you must know.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.

Remedies for Distressed Loans

Once a loan becomes distressed, usually by falling into default, the lender and the borrower have options. Some of these require the lender to file a lawsuit, but not all of them do. A lender may demand that the borrower makes payments on their mortgage loan without filing a lawsuit, or they may exercise any self-help rights they have to the collateral.

Lenders and borrowers also sometimes enter into a consensual agreement that does not require the approval of the court. Loan modifications and deeds-in-lieu of foreclosure are two of these options, just as they are in cases following residential foreclosure.

Lenders may sometimes feel that all of these options carry more risk than they do benefits. When that is the case, they may choose to proceed with a judicial foreclosure. In these cases, it is important to know what to expect.

Commencing a Foreclosure Action

When a lender has decided to foreclose on a property, they must provide borrowers or guarantors with a notice of default. The original loan documents will outline how lenders are required to do this. When the property in question is income-producing, the lender may also make a demand for rents. In these cases, a lender may choose to notify the tenants that rent payments should be redirected to them.

Commercial mortgage loans typically consist of a note that includes many different types of property. These may include:

  • The obligation of the debt
  • A mortgage granting a lien on a property
  • Security instruments that grant a lien on personal property
  • The lender’s rights, such as the assignments of rents, contracts, and permits
  • Personal guarantees regarding the payment of the debt
  • Documents outlining additional collateral, such as reserve accounts and letters of credit

In the event that a lender wants to proceed with a foreclosure, they are not required to file separate actions for real and personal property. The lender may proceed with a single action for all collateral given for the loan. Lenders can also request a deficiency judgment for any amount still owing on the mortgage.

Litigation Involving Commercial Foreclosure

Lawsuits involving commercial foreclosures work very similarly to those involving a residential foreclosure. The lender or mortgage note holder will file a complaint against you and you will have 20 days to answer the complaint.

When you answer the complaint, you have the opportunity to raise any defense to the foreclosure. Many people do not understand that there are several defenses to a commercial foreclosure, or they are unsure of whether one is applicable to their case. This is one reason why it is so crucial to work with a foreclosure defense lawyer. A lawyer will review the case and may find a defense, such as if the person that filed the lawsuit does not currently hold the mortgage note.

Federal law also requires mortgage loan servicers to apply payments and charges to a mortgage loan appropriately. If they fail to do so, it may appear as though the loan is in default even when it is not. As such, it may be proven that you have made proper payments, which can also provide a valid defense.

If you do not have a defense to the foreclosure, which happens all too often when property owners do not work with an attorney, the lender may petition the court for a summary final judgment on the foreclosure on the basis of motions or affidavits filed. This is very dangerous because a hearing date will be set and the judge may issue an order in the lender’s favor, which would result in the lender proceeding with the foreclosure.

In the event that you do have a valid defense to the foreclosure, a trial will be scheduled in front of a judge alone with no jury. Lenders typically do not typically want to proceed with a trial, as they are quite costly and time-consuming, particularly if you have a valid defense for your case.

Commercial Foreclosures and Deficiency Judgments

If you lose your foreclosure case, the property is then typically sold in a foreclosure sale 35 days after the final judgment of foreclosure. The proceeds from a foreclosure sale are likely not going to be enough to fully cover the amount still owed on the mortgage. In these cases, lenders often seek a deficiency judgment to recover the remaining amount on the loan.

Deficiency judgments can be tens of thousands of dollars and, after losing their commercial property, many borrowers simply cannot afford to make the payment on these judgments. When you have a valid defense and come to an agreement with the lender, you can also include a provision within that agreement that the lender will not seek a deficiency judgment. Always speak to a foreclosure defense lawyer that can ensure these provisions are included, and that you are protected now and in the future.

Our Florida Foreclosure Defense Lawyers Are Here to Help

Although the above is a basic outline of how the commercial foreclosure process works, it is extremely complex. This is particularly true when the property produces income. If you own a commercial property and are facing foreclosure, our Fort Lauderdale foreclosure defense lawyers are here to help. At Loan Lawyers, we have extensive experience with the many defenses available in foreclosure cases and we will use them to give you the best chance of retaining your property.

Call us today at (954) 807-1361 or contact us online to schedule a free consultation and to learn more about how we can help with your case.