Posted By: The Ticktin Law Group
Commercial foreclosure is similar to residential foreclosure, except that the property secured by the mortgage is owned by a business or commercial enterprise. Commercial foreclosure occurs when the business owner defaults on their mortgage with the bank and the bank institutes proceedings to foreclosure on their lien against the property. The owner of the property is called the “mortgagor” and the lender is called the “mortgagee.” The process for commercial foreclosure is very similar to the process for a residential foreclosure. The major difference is that the bank litigates against a business rather than an individual homeowner.
The very first step in the commercial foreclosure process actually occurs by the mortgagor (or owner) and is called the “default.” The default is essentially a breach of contract by the individual who owns the commercial property. The most common breach of contract is failure to pay. The lender then typically sends a demand letter to the borrower on the loan stipulating the breach and stating the terms that must be fulfilled to reinstate the loan as current. Usually the lender will include a payment amount in the demand letter and a due date by which the lender must receive the payment.
If the mortgagor ignores the demand letter or does not have the financial capacity to make the requisite payment(s), then the next step in the commercial foreclosure process is the bank filing a formal proceeding in court indicating their intent to foreclosure on their mortgage and promissory note. This is called a complaint (Lis Pendens) and summons. After the complaint is served upon the borrower, the borrower has a certain amount of days to respond with defenses. It is crucial to retain an attorney well in advance to ensure the proper defenses are formulated and included in the answer. From that point, the normal litigation procedures occur including but not limited to: mediation, discovery, various motions and/or settlement. If a settlement is ultimately not reached, the case will go to trial.
Contact the attorneys of The Ticktin Law Group to assist you with foreclosure defense action and/or any other legal matter you, a friend or a loved one may have. The attorneys of The Ticktin Law Group offer complimentary legal consultations.