Welcome to my blog. I use it primarily to publish my materials from programs I present before the American Bar Association, the American College of Real Estate Lawyers, the American Inns of Court, the District of Columbia Bar, the Maryland State Bar Association, the Harvard Business School Club of Washington, D.C., and other organizations. I would love to receive any questions, comments, criticisms and suggestions you may have on any of these topics. Please check my law firm’s website, at www.samuelson-law.com, and contact me.

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  1. All articles contained in this Blog are only as of their respective dates. None of them has been updated since then. The reader is urged to supplement all of those materials.
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Recently in Distressed Commercial Real Estate Category

October 8, 2012

Real Estate Title Problems - Solutions Available Only in Bankruptcy

Sometimes a parcel of commercial real estate suffers such title problems that it becomes so unwieldy that a title insurance is unwilling to insure over. In such situations, the extraordinary powers of a Bankruptcy Court may be the only solutions available. The program for which this paper was written dealt with the questions of when Bankruptcy applies, and what extraordinary tools it provides, for such title problems.

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Posted In: Distressed Commercial Real Estate

April 4, 2010

Workout Incentives and Disincentives, Especially with respect to Hotels

When a commercial real estate loan goes, or is going, bad, each party has options. Pretend and extend, state receiverships, foreclosures, short sales, bankruptcies, and deeds-in-lieu of foreclosure - whether within or without the context of a formal workout agreement - each has its own pros and cons for each party. Deciding what to do is particularly difficult in the case of a hotel, since a hotel is both a real estate investment and an operating business, usually with labor unions and flags, sometimes with public/private incentives, and often with numerous other third parties. Hotels that are part of a complex including condominiums or other facilities add even more interested parties and their lenders. The following are some of the main considerations involved.

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Posted In: Distressed Commercial Real Estate

October 21, 2008

Purchase Price Challenges to a Commercial Foreclosure Sale in Maryland

(10.21.08)

The below addresses what challenges an owner may make to the purchase price obtained in a Maryland foreclosure sale of commercial real estate. Since this area of the law is changing rapidly, the reader needs to check statutes adopted, and cases rendered, after 10/21/08 and, particularly, not to assume that any of the below applies to residential property.

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Posted In: Distressed Commercial Real Estate

April 3, 2008

Form - Workout Agreement to Continue Funding Construction

If mezzanine and other lenders are involved when a real estate project is going badly, especially one in the middle of construction, the lenders will probably have to decide whether, and, if so, on what terms, to continue finding. If the best course of action is indeed to continue funding, then issues are likely to arise as to how to incentivize potential funding sources to provide the additional funds, and the developer, if the developer is the best person to complete the construction, to continue. Obviously, many risks and variations are possible. The following form is a template for addressing some of those issues and is to be used in the context of local boilerplate.

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Posted In: Distressed Commercial Real Estate

April 3, 2008

Form - Workout Agreement for a Deed-in-Lieu

The following form is designed to address the situation in which a lender and the borrower agree upon a workout in the form of a deed-in-lieu. As with all forms, it needs to be tailored to the particular transaction. Furthermore, it does not include state and local requirements or any of the boilerplate.

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Posted In: Distressed Commercial Real Estate

February 27, 2008

Title Insurance Company's Concerns in Issuing Coverage for Lender Remedies for Distressed Commercial Real Estate

By: Kenneth L. Samuelson, Esq.

Deckelbaum

Washington, D.C.

2/27/08

Lender and Borrower enter into a workout agreement pursuant to which Lender's subsidiary takes record title and the mortgage remains upon the property Lender forecloses upon the property (straight or via a lift stay); and Lender, or Lender's subsidiary (as REO), sells it to an unrelated third party Borrower files bankruptcy and the property is sold under the jurisdiction of the Bankruptcy Court
Why should Lender get an owner's insurance policy? Coverage as to the existence of any intervening acts and the types of items described below, particularly creditors' rights endorsement. In selling REO, the creditor's rights exception does not relate back to the prior sale.
Insuring over standard exceptions 1. Borrower's/

Seller's affidavit and indemnity is worthless.

2. Purchaser should be able to give it for its own loan policy.

 No Seller's affidavit or indemnity. No affidavit or indemnity from Borrower or the bankruptcy estate
Insuring over mechanics' liens 1. Borrower's/

Seller's affidavit and indemnity is worthless.

2. Purchaser should be able to give it for its own loan policy.

 1. State law

2. Issue as to Lender's implied consent.

 Addressed by court order
Non-merger endorsement Non-merger language in the workout agreement and in the deed. Effectiveness under state law? N/A State law
Creditors' rights endorsement 1. Borrower has to request.

2. Borrower has to acknowledge that the loan is in default.

3. Borrower has to acknowledge that the loan outstanding exceeds the value of the property.

4. Get an appraisal to that effect.

5. What is the consideration to Borrower - forbearance; partial or total forgiveness, release or extension; covenant not to sue principals of borrower or for a deficiency or for breach of various other covenants; walking around money or paying some of Borrower's expenses, including for removal of other liens; no other liens exist; and non-merger language in the workout agreement and deed?

6. If the consideration is forgiveness of indebtedness, issue whether Lender or its subsidiary is a "good faith purchaser for value" as required under the Owner's policy conditions.

 Fear that the foreclosure was not conducted properly, especially with a non-judicial foreclosure. Opinion of lender's counsel to transfer a negligence standard of the attorney to a strict liability standard of the title insurance company? 1. Fear that a sale conducted without Court approval may not be conducted "in the ordinary course of business" under Bankruptcy Code Section 363(c). Opinion of lender's counsel to transfer a negligence standard of the attorney to a strict liability standard of the title insurance company?

2. Fear that, prior to the date a plan or reorganization is approved (beyond appeal), a bankruptcy court could find an equitable subordination under Bankruptcy Code Section 510(c); however, with a reputable lender, title company could have language protecting itself.

3. Cram-down is not a title issue.

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Posted In: Distressed Commercial Real Estate

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