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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Real Property - Finance

Date & Time
  • event Date

    Tuesday, April 6, 2021

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will examine the issues presented when a lender takes a deed in lieu of foreclosure on commercial real estate. The panel will discuss the advantages of taking a deed in lieu, title concerns, addressing existing liens and other borrower financings, and nonrecourse carve-outs and other negotiating points to consider.

Faculty

Clint Kakstys
Member
Sills Cummis & Gross, PC

Mr. Kakstys’ practice focuses on the acquisition, disposition and financing of commercial properties. He represents owners of properties throughout the U.S. in connection with purchases and sales, with particular emphasis on shopping center transactions. Mr. Kakstys also represents institutional lenders in the origination of commercial mortgage loans for their securitization and balance sheet lending platforms. His practice encompasses financing a variety of property types throughout the country, including retail, multifamily, office, hotel and industrial assets, and he has experience with a wide array of financing structures and deal features, including subordinate and mezzanine debt, 1031 and reverse 1031 exchanges, leasehold mortgages, industrial development agency interests and tenancy-in-common ownership. Mr. Kakstys also has experience representing clients in connection with loan purchases, sales and modifications and commercial leases and subleases.

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Jason C. Bergman
Vice President & Senior Underwriting Counsel
Benchmark Title Agency, LLC

Mr. Bergman has nearly two decades of experience in the real estate/title insurance industry. Prior to joining Benchmark, He was a Vice President and Underwriting Counsel for one of the nation’s largest title agencies. Before that, Mr. Bergman was title insurance underwriting counsel for First American Title Insurance Company in New York, and previously served as claims counsel for First American Title Insurance Company and Fidelity National Title Group. He is a three-term Chair of the New York State Land Title Association’s Law Committee, is Vice-Chair of the American Bar Association Real Estate, Condemnation, and Trust Litigation Committee’s Title Insurance subcommittee, and Co-Chair of its Mortgage and Foreclosure subcommittee.

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Michael J. Viscount
Miscellaneous

Description

When a commercial mortgage goes into default, a deed in lieu of foreclosure offers distinct advantages: the lender becomes the owner of the property, allowing the lender to take immediate control of its operation, and the transaction can be quickly negotiated and completed, avoiding the time and expense of foreclosure. In exchange, the borrower and guarantor can negotiate a release of obligations under the loan. Still, there are pitfalls that both parties should consider.

Before agreeing to take a deed-in-lieu, a lender must conduct due diligence to identify the risks and potential liabilities associated with the property, including environmental issues, delinquent taxes, judgments, and other liens and encumbrances. This should include a thorough analysis of any mezzanine loans and related intercreditor agreements. A non-merger endorsement should be obtained from the title company to ensure that the deed and mortgage remain separate, so that the lender may later foreclose out subordinate liens if necessary.

The deed in lieu agreement should describe the consideration for its execution and contain an acknowledgment that the property's value is less than the outstanding indebtedness. If the property's value exceeds the debt, the transaction may be set aside in bankruptcy. The most heavily negotiated points will likely involve reps and warranties and any nonrecourse or other loan obligations which will remain after conveyance.

Listen as our authoritative panel discusses the pros and cons of deeds in lieu and the key issues which must be addressed in a deed in lieu agreement.

Outline

  1. Advantages of taking a deed in lieu of foreclosure
  2. Lender concerns
    1. Due diligence: assessing environmental issues, delinquent taxes, judgments, and other liens and encumbrances
    2. Subordinate liens are not wiped out: non-merger and other title endorsements
    3. Mezzanine and junior lenders: intercreditor agreement(s)
  3. Borrower concerns
    1. Continuing liability after the conveyance
    2. Liability to other lenders and creditors
  4. Key terms of a deed in lieu agreement
  5. Bankruptcy issues
  6. Tax issues

Benefits

The panel will review these and other critical issues:

  • What is the primary advantage to the lender of taking a deed in lieu of foreclosure?
  • How can a lender retain the right to foreclose out junior lienholders after taking a deed in lieu?
  • What are the key provisions that should be included in a deed in lieu agreement?
  • Why is property valuation an important aspect of a deed in lieu transaction?
  • How might the tax treatment of a deed in lieu transaction vary from a foreclosure?