To understand commercial foreclosure a rudimentary knowledge of foreclosure will be required. When a person or a group fails to make regular mortgage instalments then the borrower is said to be defaulting. After the expiry of a certain period (this differing from state to state) the borrower is served a notice of warning that foreclosures proceedings are imminent by which the lender will sell the house in question and realize dues. The lender also seeks the permission of the court to do so. A grace period is given known as the pre-foreclosure stage when the borrower is given a chance to come to a settlement with the lender. If that does not materialize then the foreclosed house is sold at a court auction. When that auction fails the banks repossess the house and try to do the best it can with it.
Foreclosure may be of two types of buildings – houses used for residential purposes and those used for commercial reasons. Commercial foreclosure relate to units that are being used for business reasons and have failed to keep mortgage commitments.
Commercial foreclosure law is about those rules and its enforcements that are applicable to defaults of business groups who have taken loans keeping a security. A lender who has lent out money to a business firm and if the latter defaulted then under commercial foreclosure law the former can collect dues by foreclosing on the unit, selling it and realizing dues. Commercial loans are distinct from personal consumer loans.
There are many types of collateral in business loans but the most common is the keeping of a house as security. This house is the land that the business entity owns. But commercial foreclosure can also hone in on a myriad assets like fleet of vehicles, the furniture of the office and also intangible assets like the money that is due to the company from exterior sources.
The word ‘lien’ is also closely associated with commercial foreclosure. The lien is a claim on the property for the clearance of some dues. The lien is granted by the borrower to the lender and by this a commercial foreclosure can be initiated by the latter if and when default arises. Commercial foreclosure is part of the process of enforcement of the lien or in other words the mortgage. Simply put – a commercial foreclosure means the termination of the rights of a business borrower to the property that has been pledged as security. In legal parlance it can be said that commercial foreclosure law is a distinct type of collection law. These rules govern how the lenders (banks or financial bodies) can recover money by selling collateral that has been granted by the business entity as security for the loan.
In Dallas-Fort Worth the picture is grim with commercial foreclosure increasing by 35% during the first 6 months of the current year. The numbers are modest with less than 1,000 commercial foreclosure recorded in June according to Foreclosure Listing Service that lists both residential as well as commercial foreclosure. By contrast there were 25,000 residential foreclosures in this area.