A business threatened by a commercial foreclosure may have several defenses that can stop the process. These defenses may be grounded in contractual and statutory terms. One defense that may be both contractual and statutory based is lack of notice of default. The mortgage terms and state laws require the lender to follow a designated foreclosure notification process. If that process is not carefully followed, the business may be able to stop the foreclosure from moving forward.
Notice Requirements
There are two sets of notice requirements when a lender wants to begin the foreclosure process. The first set of requirements is contractual and is spelled out in the mortgage documents. The second set of requirements is statutory, and the notification requirements are defined by state law.
The lender is obligated to follow these requirements in detail. For example, in the Notice of Default the lender must give the borrower notice of the date late payments must be made by to bring the loan current. If the late payments are not made then the lender will send a Notice of Acceleration giving the business owner a date by which full payment must be made. A third required notice is the Notice of Foreclosure which indicates when the property sale will occur.
Defenses
There are several possible defenses based on the circumstances of the Notice of Default. For example, there must be sufficient time notice given of default as defined by the mortgage and state laws. If the Notice of Default is mailed late, then it is the equivalent of not serving notice. There are many cases where the Notice of Default was mailed to the wrong address which means the borrower was not properly notified. In a third example, the Notice of Default may not be properly filed in public records.
In these types of circumstances the foreclosure is said to have defects which gives the borrower the opportunity to fight the process. The lender must be vigilant in following all laws and mortgage requirements for issuing a Notice of Default. One mistake on the part of the lender can give the borrower a chance to end the foreclosure and renegotiate payments due.
Consult an Attorney
Developing a successful commercial foreclosure defense requires a thorough understanding of statutory and contract law. The sooner an attorney gets involved in the foreclosure process the more likely the process can be halted to allow time for further negotiations concerning amounts due the lender.
