Commercial Foreclosure Negotiating Strategies

When you purchase a commercial property, much like a residential property, you take out a mortgage loan, and you agree to make payments of a certain amount each month, at a particular interest rate, over a defined period of time.  If you fall behind on those payments, your mortgage lender can move to foreclose on your property.  Commercial foreclosure simply means that your lender takes back the mortgage, and sells the property, using the proceeds to pay off what you owe them.  It also means that you lose the property permanently, and that you have a highly negative notation on your credit report. 

Alternatives to Commercial Foreclosure

There are ways to negotiate through a commercial foreclosure, and many lenders prefer to negotiate because foreclosures are expensive and take time.  If you are facing this situation, negotiate early with your lender, and keep these strategies in mind: 

• Finding a Middle Ground – Some lenders are willing to work with you to avoid foreclosure by negotiating different terms for your loan, including lowering your monthly amount due, and extending those payments over a longer period of time.  They may also be willing to overlook a few late payments if you agree to pay your mortgage over a longer term, presuming that the lender will recover theses funds in extra interest paid over time.  They may even be willing to accept lower monthly payments for an overall higher interest rate and longer loan term.

• “Deeds in Lieu” – If renegotiating your loan terms does not work, you can legally agree to give the property back to the lender after the mortgage is paid, by returning the lender the deed on the commercial property in lieu of foreclosure.  This process of “deeds in lieu of foreclosure or forfeiture” can be somewhat complicated, so it is recommended that you hire an attorney to help you negotiate the details of a “deed in lieu.”

Before having to negotiate in any of these ways, it is best of course not to face foreclosure in the first place.  You need to take a look at your overall financial picture, determine where you are getting into trouble, and do the hard work to stop the bleed and tighten your financial ship.  Consider speaking to a financial planner.  Develop a budget and consider ways to pay down your debts.   As further options, you can consider alternatives to commercial foreclosure negotiations, like filing for bankruptcy or selling off your property.  Keep in mind that options like bankruptcy can also damage your credit for some time. 

Getting Help

When facing commercial foreclosure, it may be a good idea to get your lawyer involved. An experienced attorney can assist you in talking to your lender, exploring your options and resolving the situation in the best way possible.