The foreclosure process for commercial real estate can be complex and involves several legal actions such as lis pendens, bankruptcy, sheriff sales, and the foreclosure itself. In this article, we'll explore each of these steps in detail.
Lis Pendens: Lis Pendens is a legal document filed with the county recorder's office to give notice that a lawsuit has been filed concerning a property. In the context of commercial real estate, lis pendens can be filed by a lender or a party seeking to enforce a claim against a property. Once a lis pendens is filed, it becomes a public record and can affect the ability of the property owner to sell or transfer the property.
Bankruptcy: In some cases, a commercial property owner may file for bankruptcy to stop foreclosure proceedings. Bankruptcy can either be filed under Chapter 7 or Chapter 11 of the bankruptcy code. Under Chapter 7, the debtor's assets are liquidated to pay off creditors, while Chapter 11 allows the debtor to reorganize their debts and continue operating their business. Filing for bankruptcy can delay foreclosure proceedings and may give the property owner more time to negotiate with their lender.
Sheriff Sales: Sheriff sales are public auctions of foreclosed properties conducted by a county sheriff's office. The purpose of a sheriff sale is to sell the property to the highest bidder to recover the amount owed on the loan. Sheriff sales are typically held at the courthouse and are open to the public.
Foreclosure: The foreclosure process begins when the borrower defaults on their loan. The lender will typically send a notice of default to the borrower, giving them a certain period of time to cure the default. If the borrower fails to cure the default, the lender may file a foreclosure lawsuit. The court will then issue a judgment of foreclosure and the property will be sold at a public auction. If the property does not sell at the auction, the lender will take possession of the property and attempt to sell it through a real estate agent.
In conclusion, the foreclosure process for commercial real estate can be a lengthy and complex legal process that involves several steps. Lis pendens, bankruptcy, sheriff sales, and the foreclosure itself are all important parts of this process that both the borrower and the lender should be aware of. If you're facing foreclosure or are considering investing in foreclosed commercial properties, it's important to seek the advice of a qualified real estate attorney.