Commercial Foreclosures in Florida: What Financially Distressed Companies Need to Know

If your company has received a foreclosure notice, you will need to act promptly. While your company may have options for avoiding foreclosure, it will be critical to carefully evaluate these options and choose the best to proceed under the circumstances at hand. To ensure that you are making informed and strategic decisions, we recommend speaking with a Miami commercial real estate attorney as soon as possible.

When you speak with a Miami commercial real estate attorney, the attorney should walk you through the commercial foreclosure process, assess your company’s current options and risks, and advise you regarding the options your company has available. Then, once you decide how to proceed, the attorney should be able to take appropriate action on your company’s behalf. As we discuss below, this action could range from seeking to negotiate an informal workout to preparing to assert defenses in court.

5 Key Considerations for Companies Facing Commercial Foreclosure in Florida

What do you need to know if your company received a foreclosure notice? Here are five key considerations for financially distressed companies that are facing a commercial foreclosure in Florida:

1. Foreclosure May Not be the Bank’s Only Option

While banks will often issue a foreclosure notice to satisfy contractual notice requirements and preserve their ability to go to court if necessary, when a company is behind on its rent payments, a commercial foreclosure isn’t necessarily the bank’s only option. In this scenario, banks may have a variety of other options—and it is important for financially distressed companies to consider these possibilities as well.

For example, commercial mortgage agreements will frequently allow banks to compel the assignment of rents, contracts and other assets. If your company cannot afford its mortgage payments, losing the ability to collect rent or to enforce other contractual rights to payment could make your company’s situation go from bad to worse. While it may not be possible to prevent the bank from taking this type of action if it chooses to do so, financially distressed companies will often be able to target resolutions that better serve the interests of all parties involved.

2. A Negotiated Resolution that Avoids Foreclosure May Be in Everyone’s Best Interests

Given the costs involved in the commercial foreclosure process, avoiding foreclosure will often be in all parties’ best interests. With this in mind, it will be possible to target a negotiated resolution in many cases. Some examples of potential negotiated resolutions include:

• Modifying the terms of the mortgage to reduce the interest rate or extend the duration of the loan;
• Recasting the mortgage or reconstituting the terms of the loan; and,
• Executing a deed in lieu of foreclosure to transfer the property to the lender.

Again, these are just examples. When deciding whether to consider these (or other) means of resolution, lenders and borrowers alike must carefully consider the long-term financial implications involved. If modifying the terms of the loan or recasting the mortgage is only likely to be a short-term solution, then it may not be the best path forward.

3. There Are Several Potential Defenses to Commercial Foreclosure Actions

While commercial mortgages are not subject to the same foreclosure restrictions as residential mortgages, financially distressed companies will still have defenses to foreclosure in many cases. Some examples of potential defenses to commercial foreclosure actions include:

• Lack of Notice – If the bank failed to comply with the notice provisions in the commercial mortgage agreement, this failure may provide at least a temporary defense to foreclosure.
• Lack of Standing – Another defense strategy that can work in some cases is to challenge the bank’s standing to foreclose on the property. This is most common in situations in which the loan has been sold.
• Statute of Limitations or Estoppel – If the statute of limitations for foreclosing on the property has expired, or if the lender has previously represented that it would not pursue foreclosure, these could serve as bars to a foreclosure action as well.

Here, too, these are just examples. From usury to fraud, there are a variety of other defenses that may apply in specific sets of circumstances. When you consult with a Miami commercial real estate attorney, the attorney should be able to assist with identifying all applicable defenses under the circumstances at hand.

4. Commercial Foreclosure Actions Can Move Quickly

Once a bank initiates a commercial foreclosure action, the process can move quickly. If the bank can prove everything it needs to prove in order to establish that foreclosure is warranted—and if the debtor fails to effectively insert itself into the process—the court will authorize the foreclosure to move forward. At this stage, protecting a financially distressed company’s interests can become much more difficult, so it is important to avoid this scenario if at all possible.

5. Filing for Bankruptcy (if Warranted) Could Prevent Foreclosure and Other Means of Enforcement

For companies that are facing commercial foreclosure actions, filing for bankruptcy can be a viable solution in some cases as well. When a company files for bankruptcy, this triggers an automatic stay that prevents its creditors from pursuing collection actions, including foreclosure.

Chapter 11 of the U.S. Bankruptcy Code allows financially distressed companies to reorganize their debts and remain in business. Under Subchapter V, many companies are eligible to pursue “small business bankruptcies” that significantly reduce the time and costs involved in the process. While pursuing a business bankruptcy isn’t the right move in all scenarios, it is another option that is worth considering for many companies.

Speak with a Miami Commercial Real Estate Attorney at Edelboim Lieberman

Is your company facing a commercial foreclosure? If so, we can help. We have extensive experience representing financially distressed companies in foreclosure actions, informal workouts and business bankruptcies, and our attorneys can help you make informed and strategic decisions about your next steps. To speak with a Miami commercial real estate attorney at Edelboim Liberman in confidence, call 305-768-9909 or request a confidential consultation online today.