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How to respond to a business property foreclosure threat

Foreclosures on and seizures of business properties happen for some of the same reasons that residential ones occur; a company's owners fail to make necessary payments toward them. With business foreclosures, a bank may even be able make the full amount of the loan immediately payable through an acceleration clause written into it.

With business loans, debtors who default on them are usually sent notices advising them of that fact. These letters generally include a time frame during which the owners can either bring their payments current or otherwise file for bankruptcy. If the business owner does neither, then the property will be taken back and sold by the bank.

Any proceeds from the sale will go to satisfy liens placed on the property. If there's any amount still left on the table that's owed, then the debtor may be assessed that amount after the sale is finalized.

In some jurisdictions, they allow for what's called a power of sale foreclosures whereas in others they allow for judicial ones. With the former, it allows for the entity carrying the mortgage to sell their property without intervention from the court. With the latter, it allows for the property's sale to be administered by the court itself.

Some jurisdictions also allow for a deed in lieu of a foreclosure as an alternative to a business foreclosure. It generally involves the the creditor reassuming the deed on the property at a fair market value.

Foreclosures on business properties don't necessarily have to happen in conjunction with a bankruptcy. While a Chapter 7 bankruptcy may list the property as being liquidated, a debtor may be unable to walk away from it. A company filing for Chapter 11 bankruptcy may even be unable to save the property if the bankruptcy trustee decides it would instead be best for it to be sold to pay outstanding debts.

Business foreclosures can be averted in much the same ways as residential ones can. Corporate property owners may be able to find another buyer for the property, refinance the purchase of it, request a restraining order to halt it, find some way to personally back it or file for bankruptcy.

If you've been told that your company's property may be foreclosed on, then a Collier County, Florida, commercial real estate attorney can provide guidance in your case.

Source: The Balance, "Foreclosures on business property," Jean Murray, accessed Nov. 24, 2017

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