How do I foreclose on a commercial property?

If you are a lender who holds a note on a commercial property that isn't being paid, you may need to know: how do i foreclose on a comm property? The answer to this question is going to depend on the laws in your particular state. In general, however:

• You will need to begin by sending a notice of default. This lets the borrower know that he's behind on his payments
• You will need to follow up with the letter with further communications, including giving the borrower a time limit with which to become current on the mortgage

Once the borrow is behind on payments and has failed to rehabilitate the mortgage, you will then need to actually go through the foreclosure process. In many states, judicial foreclosure is required- which means you actually have to go to court, prove the default and get a judgment of foreclosure. In some states, however, there is a clause in your deed allowing you to foreclose upon default even without going to get a judgment of foreclosure. If that is the case, you'll just need to make sure your notice requirements are met (i.e. the borrower knows foreclosure is impending, the foreclosure and foreclosure sale have been publicized in an appropriate forum) and then you can take the property.

The key distinction for a commercial foreclosure, however, is that there may be a tenant or tenants living there. Under tenant protection laws passed in 2009, you may be stuck with those tenants for a while: the laws generally allow tenants to stay until the end of their lease when a property is foreclosed on, and/or to stay for up to 90 days after the foreclosure if they are on a month to month lease.

If you are attempting to foreclose on a commercial property, you need a lawyer to help make sure you do everything right so you don't find yourself in violation of the law.