When a business fails to meet its mortgage payments they will face the possibility of commercial mortgage foreclosure. As with residential mortgage, however, a company has options to help prevent losing their real estate property.
After a company fails to make two mortgage payments a lender will issue a notice of default. Depending on the state where the business resides, a company has many options in order to cure default. An internal option is for an organization to reorganize all of their debts, or if the option is available, consolidate their debt into one manageable payment. If a company is unable to meet their financial obligations, including their mortgage payment, filing bankruptcy may be a necessary step and can stall the foreclosure process. Depending on the general obligation agreement in your commercial mortgage, a bankruptcy may also stop the lender from being able to pursue the company for a remaining balance if the property is sold to pay the mortgage.
Instead of waiting for a lender to sell a property at auction, a company may decide to try to sell the property themselves to raise the capital to cure the default. Any difference however will still need to be paid by the company to fulfill their obligation to the lender.
To prevent commercial mortgage foreclosure, a company can often negotiate with the lender. Some negotiation options include different payment terms, lowering the mortgage payment, refinancing the mortgage, forgiving some of the late payments and deed in lieu of foreclosure. A deed in lieu of foreclosure is when the company returns the deed to the lender. The lender can then sell the property at auction or private sale to recoup their losses but the company can often remain on the premises.
Commercial mortgage foreclosure is a serious situation but it is not an unavoidable conclusion. When a company is facing foreclosure they have many possible options that can allow them to remain on the premises and still cure the default. Consulting an attorney with experience in commercial mortgage foreclosure will help you determine the best course of action based on your company’s situation and needs. It is also important to understand that in today’s economy it is not uncommon for businesses to have trouble meeting their financial obligations. So do not be afraid to seek help, and do not be reluctant to contact your lender to negotiate better mortgage terms.
Tags: commercial mortgage broker, deed in lieu of foreclosure, filing bankruptcy, manageable payment, mortgage foreclosure