Editors’ Note: this is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to email@example.com and we will try to answer it.
Scott T, emailed, asking, “I have a client who owns a few income-producing properties and she thinks she may not be able to make her next mortgage payments to her lender. What should I tell her to expect?”
Once a default occurs or is looming, a proactive mortgage lender should be expected to review several factors surrounding property management. If a third-party manager is involved, the lender will want to determine whether any lien rights arise in favor of this manager, including in connection with any leasing activities for the project. The lender is likely to want to get a handle on how cash comes in and how it is disbursed. Agreements with in-place property managers are crucial in workouts involving income-producing properties. You should look into the law of your local jurisdiction, as a lender facing a loan default where the property is generating income is armed with some significant tools, often including the ability to appoint a receiver.
[Editor’s Note: For more information, please see What do Secured Lenders Want? The Basics of Loan Forbearance Agreements.]
Note: This 90 Second Lesson is based, in substantial part, in material reprinted from Commercial Bankruptcy Litigation 2d and Strategic Alternatives for and Against Distressed Businesses, with permission of Thomson Reuters. For more information about these publications, please visit www.legalsolutions.com.
The editors and editorial board of DailyDAC include preeminent restructuring and insolvency professionals, journalists, and editors. They are devoted to providing reliable and plain English education and deal intelligence about assignments, corporate bankruptcy, receiverships, out-of-court workouts an similar topics.
90 Second Lesson: What is a “prepackaged bankruptcy?”
90 Second Lesson: If I File a Chapter 7 Bankruptcy, Are the Assets of My Single-Member LLC Safe From the Trustee?
Fancy Filing: Can They File a Chapter 11 Bankruptcy Case Just to Gain a Litigation Advantage?
90 Second Lesson: Secured Creditors and Toll Charges
90 Second Lesson: What is a “UCC Article 9” Sale?
Commerical Bankruptcy Litigation
Our weekly newsletter, sent every Tuesday at 9am, includes: