Commercial Real Estate Lawyer Blog

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Loan No.
Property Address
SETTLEMENT AGREEMENT CALLING FOR, INTER ALIA, A PROMPT DEED-IN-LIEU OF FORECLOSURE TO LENDER'S DESIGNEE
(excerpt of generally only those contract provisions particular to this type of transaction)
THIS SETTLEMENT AGREEMENT CALLING FOR, INTER ALIA, A PROMPT DEEDIN-LIEU OF FORECLOSURE TO LENDER'S DESIGNEE (this "AgreementU) is made as of the "Effective DateU set forth below, by and between (a)
a
("OwnerU); and
, a ("LenderU)
RECITALS:
A. Owner is the fee simple title owner of certain real property located within the County of State of
which real property is more particularly described on Exhibit" hereto, together with any and all infrastructure and
U
improvements situated thereon (collectively, the "Land and BuildingsU). Owner is also the owner of all personal property (other than personal property of any tenants) located on and used in the operation of the Land and Buildings (collectively, the "Personal PropertyU) and all building materials and supplies, if any, situated in, on, or about the Land and Buildings, or in separate storage facilities, and described in Exhibit " hereto (collectively, the
U
"Building MaterialsU). (The Personal Property and the Building Materials are herein collectively referred to as the "PersonaltyU; and the Land and Buildings, the Personalty and the other tangible and intangible properties subject to the "Assignment of Leases u or the "General AssignmentU described in Paragraph 1.A. hereof are herein sometimes referred to, collectively, as the "Propertyu.)
B. To evidence a certain mortgage loan made to Owner by Lender, Owner executed and delivered that certain promissory note dated 20 payable to the order of Lender, in the principal amount of
Dollars ($ ), together with interest thereon at the
-,--------,------rate
therein stated (the "NoteU), and, as security therefor, Owner executed and delivered the following documents in favor of Lender:
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
1
(1) Mortgage and Security Agreement, of even date with the Note, recorded in the office of the of
County, as Number which Mortgage and Security Agreement establishes a first lien and security interest in the Property (the "Mortgage") ;
(2 ) Assignment of Leases, Rents, and Profits of even date wi th the Note and recorded in the office of the as Number (the "Lease Assignment"); and
(3)
UCC-1
Financing
Statement
filed
in
the
office
of
the
of
the
State
of
as
Number
(the "Financing Statement").
(The Mortgage, the Lease Assignment, and Financing Statement are hereinafter sometimes referred to, collectively, as the "Security Documents" . )
C. Owner acknowledges, represents and warrants the following unto Lender:
(1 ) Owner is in material default of its obligations under the Note and Security Documents by reason of Owner's failure to
and,
based
thereon,
the
entire
principal
balance,
outstanding
interest,
and
various
other
amounts
payable
under
the
Note
are
now
due
and
payable
in
full,
along
with
the
attorneys
fees
and
other
costs
described in the Security Documents with respect to the collection of those sums.
(2 ) _T_h--'e'--_o--'u_t_s:....t_a_n-'-dC'-i_n_g"---.J..p_r_l_·n_c-'--i.....p_a_l__b_a_l_a_n_c_e..!...,__i_n_t_e_r_e_s_t_a_n_d_l_a_t_e
charges due under the Mortgage, as of 20 total Dollars
($
);
and
interest
is
accruing
or
shall
accrue
thereon
in
the
amount
of
$
per
day
commencing
20
those
sums,
together
with
all
other
costs, charges and fees, including attorneys' fees and advances, evidenced or secured by the Note or the Security Documents, from time to time, are herein referred to, collectively, as the "Mortgage Debt".
(3) The Mortgage Debt is justly due, owing, and delinquent; and there is no offset, defense, recoupment, or counterclaim that Owner has, or, by the passage of time or otherwise,
could have,
in connection therewith.
(4)
Lender
has
repeatedly
demanded
that
Owner pay the
Mortgage
Debt,
but Owner
has
failed
and
refused
to
do
so.
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
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(5) Lender has the immediate right to pursue all of its rights and remedies pursuant to the Note and the Securities Documents, including foreclosure and seeking the appointment of a receiver for the Property and such other remedies as are available at law or in equity.
(6) The fair market value of the Property is less than
Dollars (% ), which is substantially less than the Mortgage Debt.
D. In view of the Owner's lack of equity in the Property and to avoid further time-consuming , expensive, and needless litigation, Owner has requested Lender to accept a settlement, pursuant to which the Property would be transferred, to Lender's designee, whereupon Owner (and the owners of the Owner) would be released from any
personal liability
for
a
money
or
deficiency judgment
upon
the
Note
or
the
Security
Documents.
Lender
is
willing
to
accept
such
a
settlement,
but
only
upon
the
terms
and
conditions
hereinafter
set
forth.
E. Owner acknowledges that transfer of the Property to Lender's designee and a release from further obligations under the Note and Security Documents are of direct and substantial benefit to Owner and constitute fair and adequate consideration for Owner's entry into this transaction. Lender acknowledges that transfer of the Property to its designee, including Owner's waiver of all rights of equitable and statutory redemption, without the necessity of litigation, is of direct and substantial benefit to it and is fair and adequate consideration for Lender's entry into this transaction. Owner and Lender acknowledge and agree that the transfer of the Property is for reasonably equivalent value.
NOW THEREFORE, in consideration of the respective covenants contained herein and intending to be bound hereby, Owner and Lender covenant and agree as follows:
1.
THE RECITALS. The foregoing Recitals are incorporated herein as though set forth here as covenants, representations and warranties of Owner.
2.
UP-FRONT PAYMENTS BY BORROWER. Concurrently with the execution hereof, Owner shall pay to Lender all attorneys' fees, and other costs, and expenses, including reimbursement of Lender's advances thereof, heretofore (including on the Effective Date) incurred by Lender in the negotiation and preparation of this Agreement, the Closing Documents, and all documents incident thereto and in arranging for the conveyance and transfer of the Property.
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
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3. THE CLOSING. Owner shall deed the Property to the Lender's designee and take all of the other actions to be taken by Owner under the terms of this Agreement at the time of such deed (the "Closing").
(All documents executed and delivered hereunder by one or more of the parties hereto at the Closing shall sometimes hereinafter be referred to, collectively, as the "Closing Documents".] The Closing shall be held on 20 or such earlier date, if any, as the parties hereto agree upon (the "Closing Date") [vs. putting the deed into escrow] .
A. At the Closing, Owner shall complete, execute, where called for acknowledge, and deliver, to Lender's designee, in form and content satisfactory to Lender in accordance with Lender's general procedures and requirements for accepting deeds-in-lieu of foreclosure:
(1)
Owner's deed, in the form of Exhibit hereto and otherwise in recordable form, conveying the Land and Buildings to Lender's designee (the "Deed")
(2)
Owner's bill of sale and assignment, in the form of Exhibit hereto, conveying the Personalty to Lender's designee (the "Bill of Sale") .
(3) Owner's assignment, in the form of Exhibit
hereto, conveying, to Lender's designee, all of the Owner's interest in all of the leases, licenses, and other occupancy agreements for space in or on the Land and Buildings (the "Assignment of Leases") .
(4)
Owner's general assignment, in the form of Exhibit hereto, transferring, to Lender's designee, all licenses, permits, contracts, equipment leases, books, records, plans, specifications, and other documents, if any, designated by Lender's designee, to the extent the same are owned or controlled by Owner and used, or to be used, in the operation of the Land and Buildings (the "General Assignment")
(5)
Owner's certification that it is not a "foreign person", as defined in Section 1445 (f) of the Internal Revenue Code and the regulations issued thereunder, as amended from time to time
(the "Non-Foreign Affidavit" and the "Code", respectively) .
(6)
Such affidavits, indemnities, waivers and other documents as Lender's designee's title insurance company may require in order to remove title exceptions, from such designee's title insurance policy with respect to that conveyance, and issue creditors' rights, non-merger and other endorsements to that policy, in accordance with Lender's general procedures and requirements for
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
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accepting deeds-in-lieu of foreclosure (collectively, the "Title Evidence" )
(7)
Owner's certification, in the form of Exhibit " hereto, that there has been no placement or discharge of hazardous materials on or onto the Property or any other event or action that would require any reporting to any governmental agency under any Federal, state or local statute, ordinance, regulation or policy; that there are no "facilities" at, on, or under the Property which are subject to reporting under Section 312 of the Federal Emergency Planning Community Right-to-Know Act of 1986, or the federal regulations promulgated thereunder; that there are no underground storage tanks at, on, or under the Property which require notification under Section 9002 of the Solid Waste Disposal Act, as now existing or hereafter amended (42 U.S.C. §6991) or any other law or policy; that there is no asbestos on the Property; and no other disclosure is required, under applicable Federal, State or local law, to be delivered to any governmental agency or to any purchaser of the Property (collectively, the "Owner's Certification");
(8)
Owner's certification that all of the financial information theretofore supplied -by Owner or by an employee, agent, or representative of Owner to Lender to an employee, agent or representative of Owner is accurate and does not omit anything necessary to prevent it, standing alone, from being misleading.
(8)
Tenant notices, executed by Owner, in the form of Exhibit "---" hereto for each tenant, licensee and other occupant of the Land and Buildings (collectively, the "Tenant Notices").
B.
At the Closing, Owner and Lender's designee shall each, as applicable, execute and deliver such closing statements, governmentally mandated disclosures, and filing forms, as are (1) legally required or customary for the conveyance of real estate in the jurisdiction wherein the Land and Buildings are located; or (2) usually required by Lender under its general procedures and requirements for accepting deeds-in-lieu of foreclosure.
C.
A---=t_..:ct-=-h-=-e'----_C_l_o-=-s_i_n_g'-',---=_L_e_n_d_e_r__s_h--'a_l_l__e_x_e_c_u_t_e__a_n_d_d----=-e_l_i_v_e_r..:..,__t_o Owner, a covenant not to sue in the form of Exhibit hereto
(the
"Covenant
Not
To
Sue").
D.
At
the
Closing,
Lender
or
its designee
shall
pay
Owner
Dollars
($ as additional consideration.
E. This Agreement, the Closing Documents and the Closing are intended to be, and are acknowledged by Owner to effect, an absolute, final and unconditional conveyance and transfer of the Property and all of Owner's (and its owners') rights, titles,
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
5
interests, income, rents, rent equivalents, issues, revenues, royalties, and profits in connection therewith, as of the Closing Date. Owner further acknowledges and agrees that none of this Agreement, the Closing Documents or the Closing is intended to create a secured transaction or to give Owner any rights of subrogation to the position of Lender or Lender's designee. Owner acknowledges that it has no equity of redemption or other right to redeem any of the Property. There is no consideration for the transfer of the Property to Lender's designee, except as specifically stated in this Agreement. However, title to the Property shall remain subj ect to the Security Documents to the full extent of the Mortgage Debt now existing and all increases hereafter thereto. In the event that, contrary to the foregoing, it is, at any time hereafter, determined that Owner has any equitable and/or statutory rights or interest in the Property or to the return thereof, then, without additional consideration, Owner shall sell, transfer and convey the Property to Lender's designee, and waives for itself any and all equitable and statutory rights of redemption with respect to the Property.
F. None of the completion of the Closing, the delivery, acceptance, and/or recording of the Closing Documents, or the receipt of any amounts hereunder, shall:
(1)
result in a merger, of any of the interests of Lender under the Security Documents, with any of the interests of the Lender's designee as new fee holder of the Property, it being understood and agreed that those interests are and shall remain separate and distinct unless and until formally merged of record by a document expressly so stating;
(2)
be deemed a waiver by Lender of the priority, that the Security Documents have as of the Effective Date of this Agreement, over any other voluntary or involuntary liens, mortgages, security interests, judgments or encumbrances of any kind or nature, now existing or hereafter placed upon the Property, or any part thereof;
__________________ (3) be deemed a subordination by Lender of the priority that the Security Documents have as of the Effective Date of this Agreement; or
(4) affect or prejudice in any way the right of Lender to foreclose the Mortgage or to proceed as provided in the Security Documents and as otherwise provided at law or in equity to exercise its rights or remedies with respect to the Property.
The Note and the Security Documents and the lien imposed thereby shall, in all respects, survive the Closing and the delivery and recording of the Closing Documents. Owner hereby ratifies and confirms the Note and Security Documents in all respects.
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
6
G. At the Closing, Owner shall pay to Lender or to the Lender's designee:
(1)
all attorneys' fees, and other costs, and expenses, including reimbursement of Lender's advances thereof, hereafter incurred by Lender in the negotiation and preparation of any amendments to this Agreement, or the negotiation and preparation of the Closing Documents or any documents incident thereto or in arranging for the conveyance and transfer of the Property; and
(2)
the balance remaining in any management, operating or other account and all other revenue received by Owner or its employees or agents in the operation of the Land and Buildings and not otherwise applied to normal and valid operating expenses or toward amounts due to Lender pursuant to the Note or the Security Documents.
4. POSSESSION AND INDEMNITY.
A.
From time to time from the Effective Date through the Closing Date, Owner shall (1) provide Lender's designee and its employees and agents with reasonable access to the Property, during normal business hours, to perform reasonable tests and studies of the Property and to review Owner's books, records, plans, specifications, and other documents, if any, relating to the Property, and to make copies thereof; and (2) take such other steps as may be requested by Lender's designee to facilitate the transition of ownership and possession of the Property to Lender's designee at the Closing. [No protections for the Owner.]
B.
Before Lender's designee receives actual physical possession and control of the Property, neither Lender or its designee shall be deemed to have possession or control of any part of the Property or be deemed a mortgagee in possession.
C.
Concurrently with the execution and delivery of the Closing Documents at the Closing, Owner shall deliver actual physical possession and control of the Property to Lender's designee; and, as of the completion of the Closing, Lender's designee shall own the Property free and clear of any rights or remedies of Owner.
D.
Owner hereby covenants and agrees to defend, indemnify, and hold Lender and Lender's designee harmless (including by paying Lender's or Lender's designee's reasonable attorneys fees) from and against:
(1)
any and all liabilities or obligations, of every kind and nature, with respect to the Property, incurred, accrued or payable prior to the completion of the Closing; and
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
7
(2) all actions and omissions of Owner (or its owners, employees or agents), whether such actions or omissions (a) occur or arise before, during or after the Closing; or (b) constitute a breach of Owner's other obligations under this Agreement or under the Note or the Security Documents.
[In negotiating, consider what, if anything, is backing the foregoing indemnities. ]
E. Lender's designee shall defend, indemnify, and hold Owner harmless (including by paying Owner's reasonable attorneys fees) from and against:
(1)
any and all liabilities or obligations, of every kind and nature, with respect to the Property, that incurs or accrues after the completion of the Closing; and
(2)
all actions and omissions of Lender, Lender's designee (or their owners, employees or agents), whether such actions or omissions (a) occur or arise before, during or after the Closing; or (b) constitute a breach of Lender's other obligations under this Agreement or under the Note or the Security Documents.
F.
It is understood and agreed that neither Lender nor Lender's designee is purchasing or continuing the business of Owner or is otherwise a successor to Owner or to any such business.
5. RELEASES OF PERSONAL LIABILITY.
A.
At the Closing, except as otherwise expressly provided in this Agreement, Lender shall release and forever discharge Owner (and all of the owners of Owner) of and from all personal liability with respect to the terms, covenants, conditions, and agreements set forth in the Note or in the Security Documents. .
B.
At the Closing, except as otherwise expressly provided in this Agreement, Owner (for itself and its principals, employees, agents, representatives, successors and assigns) shall RELEASE AND FOREVER DISCHARGE Lender and Lender's designee (and their present and former officers, directors, owners, employees and agents) of and from all damages, loss, claims, liabilities, obligations, actions, causes of action and judgments -whether such damages, etc. are presently known or unknown -and whether they presently exist or arise hereafter -which Owner (or its principals, employees, agents, representatives, successors or assigns) may now have, or hereafter be able to claim, as a result of any actions or omissions that arose or occurred prior to the completion of the Closing, in connection with the Note, the Security Documents or otherwise in connection with the loan evidenced thereby, including but not limited to, all claims of lender liability and any other such damages, etc. otherwise connected with any dealings
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
8
or other communications, or lack thereof, between Owner and Lender, up to and including the completion of the Closing.
C. Notwithstanding anything contained in this Agreement to the contrary (1) Owner shall not be deemed to be released, in any way, from its continuing obligations under the terms of this Agreement, except that no suit shall be commenced, nor shall any claim be asserted, by Lender against Owner for personal liability under or with respect to the Note or the Security Documents (nevertheless such personal liability shall continue with respect to those obligations
(such as for fraud and environmental contamination) that expressly constitute recourse obligations under the terms of the Note or the Security Documents; and (2) the release of Owner from personal liability to Lender described in this Paragraph 5 shall not be deemed to release, discharge, or otherwise affect in any way the Mortgage Debt or the security or lien of the Security Documents. Lender retains all rights and remedies against the Property as provided in the Security Document or by law or in equity, including the right to
foreclose of this P
upon the aragraph 5
Property by reason of the shall survive the Closing.
Mortgage.
The
provisions
6. OWNER
ADDITIONAL
COVENANTS,
WARRANTIES,
AND
REPR
ESEN
TATIONS
OF
A. Owner acknowledges and agrees that this Agreement is a voluntary and sound commercial decision on Owner's part, and not the product of any duress or undue influence, for the following reasons:
The release and other benefits of this Agreement provide fair and adequate consideration for the conveyance, covenants, representations and warranties agreed to by Owner in this Agreement. Owner also
acknowledges
and
agrees
that
Owner
consulted
with
Owner's
own
attorneys
in
connection
with
the
negotiation
of
this
Agreement
and
understands
all of
the
terms
and effects of this Agreement.
B. Owner covenants and agrees that it will not interfere with or oppose Lender in, and hereby consents to:
(1)
any foreclosure or receivership by court action or otherwise, or any other proceeding which may be instituted by Lender in connection with realizing upon the security granted pursuant to the Security Documents; and
(2)
any action to quiet title which may be instituted by Lender or by Lender's designee to perfect its right, title, and interest in the Property.
Owner waives the right to a hearing in connection with any such foreclosure proceeding or other suit or proceedings and further waives
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
9
the right to require that any specific procedures by employed to govern a sale of the Property. If Owner contests Lender's or Lender's designee's right to proceed in any suit, then, Owner shall be liable, to Lender or to Lender's designee, as the case may be, for (1) all damages which Lender or Lender's designee may suffer as a result thereof, and (2) all reasonable attorneys' fees and court costs incurred by Lender or Lender's designee in such contest.
C. Owner warrants and represents, to Lender and to Lender's designee, that Owner is currently solvent and able to meet and pay its obligations as they mature. Owner agrees that, if Owner
(or any owner thereof) makes application for or seeks relief or
protection under any provision of the United States Bankruptcy Code (the "Bankruptcy Code"), or if any involuntary petition is filed against Owner (or any owner thereof) under any provision of the Bankruptcy Code, Lender shall thereupon be entitled, subject to court approval, to immediate relief from any automatic stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against the exercise of the rights and remedies otherwise available to Lender as provided herein or in the Note and Security Documents or as otherwise provided at law or in equity.
D. Owner warrants and represents that it has not conveyed, and will not convey, any of the Property and, prior to the completion of the Closing, will not permit any of the Property to be removed from the Land and Buildings.
E. Lender or Lender's designee is required, under Section 6050J of the Code, to submit, to the Internal Revenue Service, Owner's taxpayer identification number in connection with the acquisition of the Property by Lender's designee. Owner warrants and represents that its taxpayer identification number is as follows:
F. Owner covenants that all covenants, representations, warranties, documents, acknowledgments, affidavits and agreements made by Owner in this Agreement (1) are true, and complete enough that they do not omit anything necessary to prevent them, standing alone, from being misleading, as of the Effective Date; (2) shall be true and so complete on the Closing Date, just as though they were made on, as of, and with respect to the Closing Date; and (3) sh~ll survive the Closing.
G. Owner will execute and deliver all documents, and take all steps, deemed necessary by Lender to give effect to the terms and conditions of this Agreement and of the Closing Documents.
H. Owner acknowledges that Lender's designee is a successor of Lender, or a third party beneficiary, with respect to or of the rights and remedies granted to Lender under this Agreement.
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
10
I. Owner warrants and represents to Lender as follows:
[Insert Lender's standard representation and warranties.]
[Consider what, if anything, is backing the foregoing representations and warranties from Owner.]
7.
ADDITIONAL COVENANTS, WARRANTIES, AND REPRESENTATIONS OF LENDER. Lender warrants and represents to Owner that Lender is the holder of the Note and is the Lender, Secured Party, or Assignee, as the case may be, pursuant to the Security Documents and has full power and authority to enter into this Agreement and that the person executing this Agreement on behalf of Lender has the authority to do so.
8.
REINSTATEMENT. If notwithstanding the provisions of this Agreement, any payments or transfers made by Borrower pursuant to this Agreement are rescinded, or must otherwise be restored or returned by Lender (or Lender's designee), by order of court, to or for the benefit of Owner, any of Owner's principals, or its or their legal representatives or estates -whether upon any insolvency, bankruptcy, dissolution, liquidation or reorganization of Owner or of any of Owner's principals, upon an action by a creditor of Owner or of Owner's principals, or otherwise -then (a) Owner shall return, to Lender, any and all moneys paid to Owner, or on Owner's behalf, by Lender hereunder; and (b) Owner's obligations under the terms of the Security Documents shall be reinstated, and shall be effective, just as though the releases granted by Lender in this Agreement not been made. As part of any such reinstatement (a) the then outstanding balance of the Note, including all default interest which would have accrued thereunder and any additional amounts due under the Security Documents, shall be due and payable in full; (ii) the assets so returned shall remain subject to the Security Documents, including but not limited to, the perfection and priority of the Security Documents as of the Closing Date.
9.
[ADDITIONAL CONTRACT PROVISIONS. Insert Lender's standard conditions to closing including that there has been no material change in the condition of any of the Property); standard procedures for closing (including deliveries of documents, payment of closing costs, and prorations) ; standard notice provisions, attorneys' fees provisions; boilerplate provisions, signature blocks, and acknowledgements, and any statements required by the recorder of deeds. Be sure to include (a) a time of the essence clause, at least with respect to Owner's obligations; and (b) to the extent enforceable, waiver of jury trial, venue, etc.]
This form was prepared by First American Title Insurance Company and is reproduced here with its permission, but with certain changes for the purposes of presenting an American Bar Association program. First American Title Insurance Company is not responsible for any of those changes.
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