Commercial property owner deadbeats on the rise

[SK in CV]

???

[quote=Kingside][quote=investor]Putting morality aside, most commercial loans are non-recourse and have been for many years. .[/quote]

?

Most commercial loans, certainly most real estate commercial loans that involve LLCs/Corporate entities, are personally guaranteed by the principal(s). In California, those personal guarantees are very much recourse, even after the lender forecloses non-judicially and credit bids to get a deficiency.

And the lenders do sue on them.[/quote]

“Most” might be a stretch. I’ve rarely seen a true “personal guarantee” on a secured loan. The security is typically the guarantee. Corporations and LLC’s buy (and finance) property all the time and the maker of the note is the entity itself, with either the managing member of the LLC or an appropriate corporate officer signing on behalf of the entity. Less common on smaller properties, but very common on larger properties. I have seen addendums where the signor also signs as an idividual, though that has little bearing in a non-judicial foreclosure.

The only time I have ever seen a claim for a deficiency after a non-judicial foreclosure on commercial property is by a junior lien holder, when the non-judicial foreclosure was by a senior lien holder. I’m unaware of any exemption to California’s one-action rule that applies to commercial property. It might exist. Can you cite that exemption?

[investor]

[quote=Kingside][quote=investor]Putting morality aside, most commercial loans are non-recourse and have been for many years. .[/quote]

?

Most commercial loans, certainly most real estate commercial loans that involve LLCs/Corporate entities, are personally guaranteed by the principal(s). In California, those personal guarantees are very much recourse, even after the lender forecloses non-judicially and credit bids to get a deficiency.

And the lenders do sue on them.[/quote]
Kingside. Someone forms an LLC or some other type of corporation to minimise/avoid personal liability, especially with the opening up of the new world centuries ago. Of course a lender today would like to have a borrower personally sign for a company’s loan or for a commercial loan.It reduces their exposure. Most investors don’t in order to avoid having to loose personal money if the investment goes bad. I won’t personally sign on a commercial loan but I do take a hit on the interest rate if I don’t.This has been standard practice for a long time. Talk to the folks at marcus and millichap. It does set up a kind of moral hazard but not personally signing for commercial loans is nothing new. Personal homes are different. Always have been. you have to personally sign for those loans.

[investor]

[quote=Kingside][quote=investor]Putting morality aside, most commercial loans are non-recourse and have been for many years. .[/quote]

?

Most commercial loans, certainly most real estate commercial loans that involve LLCs/Corporate entities, are personally guaranteed by the principal(s). In California, those personal guarantees are very much recourse, even after the lender forecloses non-judicially and credit bids to get a deficiency.

And the lenders do sue on them.[/quote]
Kingside. Someone forms an LLC or some other type of corporation to minimise/avoid personal liability, especially with the opening up of the new world centuries ago. Of course a lender today would like to have a borrower personally sign for a company’s loan or for a commercial loan.It reduces their exposure. Most investors don’t in order to avoid having to loose personal money if the investment goes bad. I won’t personally sign on a commercial loan but I do take a hit on the interest rate if I don’t.This has been standard practice for a long time. Talk to the folks at marcus and millichap. It does set up a kind of moral hazard but not personally signing for commercial loans is nothing new. Personal homes are different. Always have been. you have to personally sign for those loans.

[investor]

[quote=Kingside][quote=investor]Putting morality aside, most commercial loans are non-recourse and have been for many years. .[/quote]

?

Most commercial loans, certainly most real estate commercial loans that involve LLCs/Corporate entities, are personally guaranteed by the principal(s). In California, those personal guarantees are very much recourse, even after the lender forecloses non-judicially and credit bids to get a deficiency.

And the lenders do sue on them.[/quote]
Kingside. Someone forms an LLC or some other type of corporation to minimise/avoid personal liability, especially with the opening up of the new world centuries ago. Of course a lender today would like to have a borrower personally sign for a company’s loan or for a commercial loan.It reduces their exposure. Most investors don’t in order to avoid having to loose personal money if the investment goes bad. I won’t personally sign on a commercial loan but I do take a hit on the interest rate if I don’t.This has been standard practice for a long time. Talk to the folks at marcus and millichap. It does set up a kind of moral hazard but not personally signing for commercial loans is nothing new. Personal homes are different. Always have been. you have to personally sign for those loans.

[investor]

[quote=Kingside][quote=investor]Putting morality aside, most commercial loans are non-recourse and have been for many years. .[/quote]

?

Most commercial loans, certainly most real estate commercial loans that involve LLCs/Corporate entities, are personally guaranteed by the principal(s). In California, those personal guarantees are very much recourse, even after the lender forecloses non-judicially and credit bids to get a deficiency.

And the lenders do sue on them.[/quote]
Kingside. Someone forms an LLC or some other type of corporation to minimise/avoid personal liability, especially with the opening up of the new world centuries ago. Of course a lender today would like to have a borrower personally sign for a company’s loan or for a commercial loan.It reduces their exposure. Most investors don’t in order to avoid having to loose personal money if the investment goes bad. I won’t personally sign on a commercial loan but I do take a hit on the interest rate if I don’t.This has been standard practice for a long time. Talk to the folks at marcus and millichap. It does set up a kind of moral hazard but not personally signing for commercial loans is nothing new. Personal homes are different. Always have been. you have to personally sign for those loans.

[investor]

[quote=Kingside][quote=investor]Putting morality aside, most commercial loans are non-recourse and have been for many years. .[/quote]

?

Most commercial loans, certainly most real estate commercial loans that involve LLCs/Corporate entities, are personally guaranteed by the principal(s). In California, those personal guarantees are very much recourse, even after the lender forecloses non-judicially and credit bids to get a deficiency.

And the lenders do sue on them.[/quote]
Kingside. Someone forms an LLC or some other type of corporation to minimise/avoid personal liability, especially with the opening up of the new world centuries ago. Of course a lender today would like to have a borrower personally sign for a company’s loan or for a commercial loan.It reduces their exposure. Most investors don’t in order to avoid having to loose personal money if the investment goes bad. I won’t personally sign on a commercial loan but I do take a hit on the interest rate if I don’t.This has been standard practice for a long time. Talk to the folks at marcus and millichap. It does set up a kind of moral hazard but not personally signing for commercial loans is nothing new. Personal homes are different. Always have been. you have to personally sign for those loans.

[Kingside]

[quote=SK in CV
The only time I have ever seen a claim for a deficiency after a non-judicial foreclosure on commercial property is by a junior lien holder, when the non-judicial foreclosure was by a senior lien holder. I’m unaware of any exemption to California’s one-action rule that applies to commercial property. It might exist. Can you cite that exemption?[/quote]

The one action rule (CCP 726) is not really an anti-deficency statute, it is a statute that requires a lender to proceed with foreclosure before seeking other remedies such a personal liability. The anti-deficency protection you are talking about, no deficiency claim against the borrower after a non-judicial forecloure, is CCP 580d.

But CCP 580d only applies to the borrower, not “true” third party guarantors. This issue has been litigated often in California, but if you want to see a recent application and interesting explanation in a recent California published decision, Talbott v. Hustwit (2008)164 Cal.App.4th 148 is a good one:

http://www.lawlink.com/research/CaseLevel3/85760

And to be clear, a “true guarantor” is a third party, not the borrower itself. I stand by my statement that most commercial real estate loans I see that involve LLCs/corps also involve personal guarantees.

[Kingside]

[quote=SK in CV
The only time I have ever seen a claim for a deficiency after a non-judicial foreclosure on commercial property is by a junior lien holder, when the non-judicial foreclosure was by a senior lien holder. I’m unaware of any exemption to California’s one-action rule that applies to commercial property. It might exist. Can you cite that exemption?[/quote]

The one action rule (CCP 726) is not really an anti-deficency statute, it is a statute that requires a lender to proceed with foreclosure before seeking other remedies such a personal liability. The anti-deficency protection you are talking about, no deficiency claim against the borrower after a non-judicial forecloure, is CCP 580d.

But CCP 580d only applies to the borrower, not “true” third party guarantors. This issue has been litigated often in California, but if you want to see a recent application and interesting explanation in a recent California published decision, Talbott v. Hustwit (2008)164 Cal.App.4th 148 is a good one:

http://www.lawlink.com/research/CaseLevel3/85760

And to be clear, a “true guarantor” is a third party, not the borrower itself. I stand by my statement that most commercial real estate loans I see that involve LLCs/corps also involve personal guarantees.

[Kingside]

[quote=SK in CV
The only time I have ever seen a claim for a deficiency after a non-judicial foreclosure on commercial property is by a junior lien holder, when the non-judicial foreclosure was by a senior lien holder. I’m unaware of any exemption to California’s one-action rule that applies to commercial property. It might exist. Can you cite that exemption?[/quote]

The one action rule (CCP 726) is not really an anti-deficency statute, it is a statute that requires a lender to proceed with foreclosure before seeking other remedies such a personal liability. The anti-deficency protection you are talking about, no deficiency claim against the borrower after a non-judicial forecloure, is CCP 580d.

But CCP 580d only applies to the borrower, not “true” third party guarantors. This issue has been litigated often in California, but if you want to see a recent application and interesting explanation in a recent California published decision, Talbott v. Hustwit (2008)164 Cal.App.4th 148 is a good one:

http://www.lawlink.com/research/CaseLevel3/85760

And to be clear, a “true guarantor” is a third party, not the borrower itself. I stand by my statement that most commercial real estate loans I see that involve LLCs/corps also involve personal guarantees.

[Kingside]

[quote=SK in CV
The only time I have ever seen a claim for a deficiency after a non-judicial foreclosure on commercial property is by a junior lien holder, when the non-judicial foreclosure was by a senior lien holder. I’m unaware of any exemption to California’s one-action rule that applies to commercial property. It might exist. Can you cite that exemption?[/quote]

The one action rule (CCP 726) is not really an anti-deficency statute, it is a statute that requires a lender to proceed with foreclosure before seeking other remedies such a personal liability. The anti-deficency protection you are talking about, no deficiency claim against the borrower after a non-judicial forecloure, is CCP 580d.

But CCP 580d only applies to the borrower, not “true” third party guarantors. This issue has been litigated often in California, but if you want to see a recent application and interesting explanation in a recent California published decision, Talbott v. Hustwit (2008)164 Cal.App.4th 148 is a good one:

http://www.lawlink.com/research/CaseLevel3/85760

And to be clear, a “true guarantor” is a third party, not the borrower itself. I stand by my statement that most commercial real estate loans I see that involve LLCs/corps also involve personal guarantees.

[Kingside]

[quote=SK in CV
The only time I have ever seen a claim for a deficiency after a non-judicial foreclosure on commercial property is by a junior lien holder, when the non-judicial foreclosure was by a senior lien holder. I’m unaware of any exemption to California’s one-action rule that applies to commercial property. It might exist. Can you cite that exemption?[/quote]

The one action rule (CCP 726) is not really an anti-deficency statute, it is a statute that requires a lender to proceed with foreclosure before seeking other remedies such a personal liability. The anti-deficency protection you are talking about, no deficiency claim against the borrower after a non-judicial forecloure, is CCP 580d.

But CCP 580d only applies to the borrower, not “true” third party guarantors. This issue has been litigated often in California, but if you want to see a recent application and interesting explanation in a recent California published decision, Talbott v. Hustwit (2008)164 Cal.App.4th 148 is a good one:

http://www.lawlink.com/research/CaseLevel3/85760

And to be clear, a “true guarantor” is a third party, not the borrower itself. I stand by my statement that most commercial real estate loans I see that involve LLCs/corps also involve personal guarantees.

[jficquette]

[quote=Arraya]Most of the world is approaching deadbeat status. We had such a nice economy until the deadbeatitus epidemic broke.[/quote]

Thank God for governmental IOU’s. What would Cali do without them??

[jficquette]

[quote=Arraya]Most of the world is approaching deadbeat status. We had such a nice economy until the deadbeatitus epidemic broke.[/quote]

Thank God for governmental IOU’s. What would Cali do without them??

[jficquette]

[quote=Arraya]Most of the world is approaching deadbeat status. We had such a nice economy until the deadbeatitus epidemic broke.[/quote]

Thank God for governmental IOU’s. What would Cali do without them??

[jficquette]

[quote=Arraya]Most of the world is approaching deadbeat status. We had such a nice economy until the deadbeatitus epidemic broke.[/quote]

Thank God for governmental IOU’s. What would Cali do without them??

[Author]

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