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What steps does a bank need to follow to assume leases, collect rent and what expenses are they obligated to pay?


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#1 angelina86

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Posted 19 February 2013 - 11:08 PM

My bank wanted me to sign a very unfavorable forbearance agreement. After refusing under its terms with no notice they sent men to my apt building to serve each tenant with a notice to pay rent to the bank in an effort to collect a debt and hung them on the main doors, telling the tenants they would be evicted if they did not pay the bank.. They did this without notifying me of their intent or filing anything in court. At the end of the day their attorney sent me an email threatening to also take the proceeds from my nightclubs in the building, leaving nothing for me to survive on.
Since nothing was filed in court do they have a right to take the rents? If tenants don't pay and they don't evict them it is their fault that money to go to the mortgage is not coming in.
My tenants are now paying them - I think - but they won't give me any record of payments. Utilities are included in the leases so who pays these and does needed repair work? Does this not make them a type of partner so they would be as liable as I am should anything happen or anyone hurt because needed repairs were not done?
Foreclosure had not been filed and wasn't filed for another 3 months. When it was they served all tenants with the same foreclosure papers served me, naming them inthe foreclosure as well as the city, dept of revenue and a host of other people and agencys. The papers included every document from the original mortgage to all 3 modifacations making all details public knowledge.
Does it sound as though proper procedure was followed? I have an attorney but would like some opinions.
Thanks

#2 adjusterjack

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Posted 20 February 2013 - 06:34 AM

Seems like proper procedure if the foreclosure proceedings have already started.

But there is too much missing from your post for anybody to properly answer your question.

Ask your lawyer.

Warning: Legal issues are complicated. Explanations and comments here are simplified and might not fully explain the ramifications of your particular issue. I am not a lawyer. I do not give legal advice. I make comments based on my knowledge and experience. I guarantee nothing. If you act on my comments without the advice of an attorney, you do so at your own risk.


#3 Guest_FindLaw_Amir_*

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Posted 20 February 2013 - 12:17 PM

This issue is very difficult to address on a message board without having the detailed facts of the situation. Has the bank filed foreclosure proceeding?

#4 angelina86

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Posted 25 February 2013 - 02:04 AM

Maybe because I've been dealing with this so long I feel its easy to understand, I'll break it out as best I can:

1. One of 3 mtgs ballooned. I ask for 3 months to finish taxes, given verbal ok by president
2. 1 1/2 months later I received a letter of commitment for this subject to a forbearance agreement not included.
3, I didn't want to sign without reading the agreement and finally got it 2 weeks later. Upon signing I would be in default for my ex not having provided financials in 4 years as he guarantees the loan. The bank could take everything with no notice to me or allow any corrections of defaults, did not have to go through foreclosure, I waved all defenses to foreclosure and bankruptcy or reorganization and could not hold them liable for anything they did.,
4.They refused to negotiate anything it contained, my taxes were almost complete so I would not sign.
5. They said if I didn't sign they were accelerating 2 other mortgages they held and foreclosing on everything.
6. The 2 mtgs were current and util this I continued to make the ballooned regular payment. Snce they said they were calling all loans I did not make that months payments.
6. 31 days past the due date a law firm showed up and served all tenants with orders to pay the bank and not me their rent in effort to collect a debt. They did not notify me prior or file anything with the court.
7.At days end their attorney sent an email threatening to take my club proceeds as they hold the license mortgage.

AT THIS POINT NOTHING WAS FILED WITH THE COURT INCLUDING FORECLOSURE

8. The tenants began paying the bank but they have not given me records of how much or to what it is applied. My secretary requested one and ask how they knew how much to collect, She was told they were taking the tenants word because they assumed I wouldn't give them lease copies.
9.They finally filed foreclosure 2 months later which is pending.
10. Since they are taking the rents does this make them the landlord nd responsible for the lease requirements,,repairs and utility payments which are included in the leases? If I am still the landlord and responsible for these would I not be responsible if full rent is not being paid for evictions? How can I do this if I don't know if they paid?
11. I paid the 1st months utilities but its becoming more difficult since they are taking the income.If the utilities are shut off who gets sued me or the bank?

#5 adjusterjack

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Posted 25 February 2013 - 09:01 AM

Now you really do need a lawyer.

Warning: Legal issues are complicated. Explanations and comments here are simplified and might not fully explain the ramifications of your particular issue. I am not a lawyer. I do not give legal advice. I make comments based on my knowledge and experience. I guarantee nothing. If you act on my comments without the advice of an attorney, you do so at your own risk.


#6 Tax_Counsel

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Posted 25 February 2013 - 02:18 PM

Since you still did not mention the state in which this is taking place, my comments are based on general legal principles.

Maybe because I've been dealing with this so long I feel its easy to understand, I'll break it out as best I can:

1. One of 3 mtgs ballooned. I ask for 3 months to finish taxes, given verbal ok by president


Two things. First, I assume by this that you mean that (1) you failed to pay the mortgage payment on time and that (2) you were planning to pay that from a tax refund 3 months later. By missing the payment deadline, your loan defaulted. The bank then has a right to pursue any and all remedies it has to collect the loan. Any modifications or extensions to pay should have been obtained in writing. The verbal ok was worth the paper it was printed on: i.e. worthless, at least from a legal perspective.

6. The 2 mtgs were current and util this I continued to make the ballooned regular payment. Snce they said they were calling all loans I did not make that months payments.



So, you then defaulted on all the loans as you didn't meet the acclerated payment the lender called for nor even made the regular payments due on them. Again, once the loans are in default the lender may take any and all recourse that it has available to collect.



6. 31 days past the due date a law firm showed up and served all tenants with orders to pay the bank and not me their rent in effort to collect a debt. They did not notify me prior or file anything with the court.


The lender could only do that without a court order if it had a security interest in the rents. It probably did, but you need to check all the documents you executed with respect to the loan to see if you granted a security interest in the rents. If you did, then the lender likely didn’t need to sue you first and get a judgment. Most security agreements in property other than real estate (like the rent payments) can be executed by the secured party (i.e. the lender) without going to court.

9.They finally filed foreclosure 2 months later which is pending.
10. Since they are taking the rents does this make them the landlord nd responsible for the lease requirements,,repairs and utility payments which are included in the leases? If I am still the landlord and responsible for these would I not be responsible if full rent is not being paid for evictions? How can I do this if I don't know if they paid?
11. I paid the 1st months utilities but its becoming more difficult since they are taking the income.If the utilities are shut off who gets sued me or the bank?


Taking the rent pursuant to a security agreement does not make the lender the landlord. You are still the landlord, at least until the foreclosure sale is completed. Thus, you still have the obligations to your tenants as set out in the lease. I realize that this puts you between a rock and hard place, but that’s how these rental mortgage situations can turn out when you default on the loan. Balloon loans are particularly dangerous because they require you to come up with a large payment at once, and if you’ve not properly planned and saved for that, you end up short and defaulting on the loan, as apparently happened here.

From a tax strategy standpoint, getting a large tax refund is not a good idea because you are giving the government an interest free loan. Instead, you want to pay in just enough to cover what you'll owe but not a lot extra. Here, it would have been better to do that and save the extra towards the balloon payment rather than having to wait until you could get everything together to file a return and then wait for the refund.

That’s of course all water under the bridge at this point. As for what you can and should do from here, I suggest you discuss this with your attorney. As I said at the outset, my comments are based on general legal principles. But there may be more here depending on all the details involved and the laws of your state.




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