Are there defenses to commercial mortgage foreclosure cases in Florida?
Unfortunately, a tell tale sign of a down economy is the failure of a small, family owned businesses, or even larger corporate entities. Many times, the individuals that are taking the risk and starting that company will make large investments, sometimes including the purchase of a commercial property for their store front or other equipment. Many times, as a result of a failed business venture, I have a chance to speak to individuals about their post closing options, including bankruptcy, debt negotiation, or in some cases – foreclosure defense. The considerations are different for everyone, but the largest amount of questions come people that may not want to file bankruptcy, they want to keep trying to save their business. I will attempt to give you some highlights from those conversations.
Commercial Mortgage Foreclosure Defense – Myth or Fact?
This one is so fact specific that I can literally blog about it forever. Whether a commercial mortgage is defensible is a matter of looking at the Note, Mortgage, and any other documents and scrutinizing every action by the lender. This can take years, but it is important to know what you are looking for up front. Under Florida law, a commercial agreement is protected by less statutory provisions and law because, at its core, a commercial transaction is deemed to be “more sophisticated.” Generally, commercial parties to a Note or Mortgage will have an attorney representing them throughout the drafting process, and this can help make the agreement between the parties more fair. Most start ups, however, do not realize that if they are not represented in this negotiation, the bank will make as many conditions go to their advantage as they can.
This is typically where I am frequently dealing with a commercial Note and Mortgage in a commercial foreclosure context. The borrowers involved didn’t have an attorney, and are now faced with an extremely one sided Note and Mortgage. Generally, there are no notice requirements. The Note in question may not even really reflect the agreement of the parties. The mortgage may not have a clear default provision. All of this is meant to try to allow the bank to have an easier time to foreclose on the commercial property.
Knowing whether there are defenses to the foreclosure requires, again, a thorough review of your loan documents and the complaint. If you have been served with a commercial foreclosure – whether it is foreclosure on a commercial space or your investment property, meeting with an attorney may help you know what options you have and give you an indication on what defenses, if any, are available to you.
Is Loss Mitigation an Option?
The truthful answer? It depends pretty heavily on the lender that is pursuing you. If it is a smaller lender or a private lender, the only loss mitigation option may be to reinstate the loan. That is where you pay the full amount that is allegedly due since your default. Put frankly, many struggling businesses do not have this kind of capital to pay the bank and still run their business. A loan modification may be an option, but that is solely at the discretion of the bank. Typically, the easiest way to try to mitigate your damages in this scenario is a short sale. This allows you to deal with the mortgage debt in a negotiated manner with the bank where they get some capital, and you can hopefully work out a deficiency waiver.
What about my personal guaranty?
This is where a lot of individuals lose sleep at night. When you realize that you have personally secured your businesses loan, you may feel like there are no answers to the lawsuit. This is where a knowledgeable attorney can be helpful. In some situations, personal guarantee’s are specific as to only one lender. This means that if your loan has changed hands, you may have a defense to the guaranty being enforced against you in the court action. This, again, requires a very careful reading of the foreclosure complaint and the guaranty.
If you are “on the hook” because of the gauranty, generally bankruptcy becomes an option for you as an individual. What chapter, however, depends heavily on your income.
If you have been served in a commercial foreclosure – either your business property or personal investment property – it is important to discuss your case with an attorney at the inception of your lawsuit. If you have just been served in a lawsuit, my office offers free consultations to help you become familiar with your rights and options. If you would like to schedule a foreclosure consultation, please do not hesitate to call my office at 813.502.6768, or e-mail me.