Can Commercial Mortgage Workouts Help Avoid Foreclosure?

Commercial workouts have provided relief to many business owners. Several Utah business owners currently struggle with ways to increase revenues and reduce expenses.  In addition to payroll, a monthly commercial loan payment can be difficult when business margins are tight.  The Utah commercial modification attorneys at Pearson, Butler & Carson, PLLC, assist business owners when their lenders are a securitized CMBS lender as well as local Utah banks when commercial loan workout negotiations break down.

Try to Avoid a Commercial Loan Foreclosure

The borrower rarely receives the full value on a commercial property due to a loss of control:

  1. A court-appointed receiver may take the operational control away from the owner during the foreclosure process.  Usually a receiver-managed property under-performs those managed by experienced owner operators.  Also, a receiver usually does not implement strict cost controls with regard to operating expenses nor achieve the highest rental rates for a commercial property.  The property may also suffer greater neglect physically when overseen by a receiver.  These factors contribute to a lower net operating income which leads to a lower purchase price by a prospective buyer.
  2. The interests of lenders and borrowers are seldom aligned in a foreclosure proceeding. In a typical foreclosure setting, a lender first wants to seize control of the property and then recouping investment losses as quick as possible.  The lender will typically try to sell the property quickly without extensive marketing efforts, depriving the borrower a chance to receive the highest price for the commercial property. Unlike a private commercial property sale, a foreclosure involves a court-administered sale with less flexible and more onerous that may turn away potential buyers.
  3. Lenders rarely coordinate the foreclosure sale with the state of the commercial real estate markets. This can result in the selling of the commercial property at an less ideal time when the real estate markets are depressed, thus eroding the likelihood that a borrower receiving any proceeds from the sale.

How Can Commercial Workouts Help Business Owners Avoid Foreclosure?

The Utah commercial loan workout attorneys at Pearson, Butler & Carson recommend to our clients to contact their commercial mortgage lenders before going into a serious loan default.  A constructive dialogue with the lender is critical in preventing the commercial lender from initiating foreclosure procedures.  But even if your commercial mortgage is down the road with the foreclosure process, our attorneys may be able to negotiate a Standstill Agreement which puts the foreclosure legal process on hold while attempting to negotiate a commercial loan workout plan.

We can also assist with business wind down proceedings, Chapter 11 bankruptcy, and Chapter 7 bankruptcy for business liquidation.

Contact a Commercial Workouts Attorney

For more information, contact a Utah commercial workouts and mortgage modification attorney at Pearson, Butler & Carson at (801) 495-4104.