Commercial property owner deadbeats on the rise

[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??

[SK in CV]

[quote=Kingside]
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.[/quote]

Thanks for the link. Interestingly, neither the subject case and nor any of the cases cited by the appelate court which supported the conclusion of the court, were LLP’s or corporations, but rather trusts, or other entities, with a true 3rd party guarantor, who was neither an owner of the secured property or an equity holder, in any manner. The case cited in which the ruling was for the borrower, the borrower was the beneficial owner of the property.

These kinds of guarantees are not typical. Part of the reason, as I pointed out in another thread, that banks are reluctant to lend to trusts.

[SK in CV]

[quote=Kingside]
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.[/quote]

Thanks for the link. Interestingly, neither the subject case and nor any of the cases cited by the appelate court which supported the conclusion of the court, were LLP’s or corporations, but rather trusts, or other entities, with a true 3rd party guarantor, who was neither an owner of the secured property or an equity holder, in any manner. The case cited in which the ruling was for the borrower, the borrower was the beneficial owner of the property.

These kinds of guarantees are not typical. Part of the reason, as I pointed out in another thread, that banks are reluctant to lend to trusts.

[SK in CV]

[quote=Kingside]
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.[/quote]

Thanks for the link. Interestingly, neither the subject case and nor any of the cases cited by the appelate court which supported the conclusion of the court, were LLP’s or corporations, but rather trusts, or other entities, with a true 3rd party guarantor, who was neither an owner of the secured property or an equity holder, in any manner. The case cited in which the ruling was for the borrower, the borrower was the beneficial owner of the property.

These kinds of guarantees are not typical. Part of the reason, as I pointed out in another thread, that banks are reluctant to lend to trusts.

[SK in CV]

[quote=Kingside]
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.[/quote]

Thanks for the link. Interestingly, neither the subject case and nor any of the cases cited by the appelate court which supported the conclusion of the court, were LLP’s or corporations, but rather trusts, or other entities, with a true 3rd party guarantor, who was neither an owner of the secured property or an equity holder, in any manner. The case cited in which the ruling was for the borrower, the borrower was the beneficial owner of the property.

These kinds of guarantees are not typical. Part of the reason, as I pointed out in another thread, that banks are reluctant to lend to trusts.

[SK in CV]

[quote=Kingside]
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.[/quote]

Thanks for the link. Interestingly, neither the subject case and nor any of the cases cited by the appelate court which supported the conclusion of the court, were LLP’s or corporations, but rather trusts, or other entities, with a true 3rd party guarantor, who was neither an owner of the secured property or an equity holder, in any manner. The case cited in which the ruling was for the borrower, the borrower was the beneficial owner of the property.

These kinds of guarantees are not typical. Part of the reason, as I pointed out in another thread, that banks are reluctant to lend to trusts.

[Kingside]

The reason commerical lenders prefer corps/LLCs whose only asset is the real estate, at least since 2005, is the lenders have a lot more advantages in Bankruptcy Court when single asset entities go chapter 11.

The legal departments of the commercial lenders who prepare the loan docs are well aware of CA guarantee law as it has existed for the last 60 years, and when the loan docs are presented, they almost always include personal guarantees for the principals to sign. I have seen this happen time and time again since the late eighties.

[Kingside]

The reason commerical lenders prefer corps/LLCs whose only asset is the real estate, at least since 2005, is the lenders have a lot more advantages in Bankruptcy Court when single asset entities go chapter 11.

The legal departments of the commercial lenders who prepare the loan docs are well aware of CA guarantee law as it has existed for the last 60 years, and when the loan docs are presented, they almost always include personal guarantees for the principals to sign. I have seen this happen time and time again since the late eighties.

[Kingside]

The reason commerical lenders prefer corps/LLCs whose only asset is the real estate, at least since 2005, is the lenders have a lot more advantages in Bankruptcy Court when single asset entities go chapter 11.

The legal departments of the commercial lenders who prepare the loan docs are well aware of CA guarantee law as it has existed for the last 60 years, and when the loan docs are presented, they almost always include personal guarantees for the principals to sign. I have seen this happen time and time again since the late eighties.

[Kingside]

The reason commerical lenders prefer corps/LLCs whose only asset is the real estate, at least since 2005, is the lenders have a lot more advantages in Bankruptcy Court when single asset entities go chapter 11.

The legal departments of the commercial lenders who prepare the loan docs are well aware of CA guarantee law as it has existed for the last 60 years, and when the loan docs are presented, they almost always include personal guarantees for the principals to sign. I have seen this happen time and time again since the late eighties.

[Kingside]

The reason commerical lenders prefer corps/LLCs whose only asset is the real estate, at least since 2005, is the lenders have a lot more advantages in Bankruptcy Court when single asset entities go chapter 11.

The legal departments of the commercial lenders who prepare the loan docs are well aware of CA guarantee law as it has existed for the last 60 years, and when the loan docs are presented, they almost always include personal guarantees for the principals to sign. I have seen this happen time and time again since the late eighties.

[investor]

Kingside. You are probably correct with cali law. I have not done a commercial loan there so I will defer to your experience. In other parts of the country, personal gurantees are typically negotiated. I wonder if california, being a hotbed of commercial investing, has gone through enough bad cycles and implemented laws requiring some personal guarentees for commercial loans. If personal guarentees are standard, anyone know what is going to happen to the borrowers with all of the underwater cali commercial loans going bad now and into the next 3-5 years? There are alot of vacant strip malls out there.

[investor]

Kingside. You are probably correct with cali law. I have not done a commercial loan there so I will defer to your experience. In other parts of the country, personal gurantees are typically negotiated. I wonder if california, being a hotbed of commercial investing, has gone through enough bad cycles and implemented laws requiring some personal guarentees for commercial loans. If personal guarentees are standard, anyone know what is going to happen to the borrowers with all of the underwater cali commercial loans going bad now and into the next 3-5 years? There are alot of vacant strip malls out there.

[investor]

Kingside. You are probably correct with cali law. I have not done a commercial loan there so I will defer to your experience. In other parts of the country, personal gurantees are typically negotiated. I wonder if california, being a hotbed of commercial investing, has gone through enough bad cycles and implemented laws requiring some personal guarentees for commercial loans. If personal guarentees are standard, anyone know what is going to happen to the borrowers with all of the underwater cali commercial loans going bad now and into the next 3-5 years? There are alot of vacant strip malls out there.

[investor]

Kingside. You are probably correct with cali law. I have not done a commercial loan there so I will defer to your experience. In other parts of the country, personal gurantees are typically negotiated. I wonder if california, being a hotbed of commercial investing, has gone through enough bad cycles and implemented laws requiring some personal guarentees for commercial loans. If personal guarentees are standard, anyone know what is going to happen to the borrowers with all of the underwater cali commercial loans going bad now and into the next 3-5 years? There are alot of vacant strip malls out there.

[Author]

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