Bulletin Bulletin Bulletin...
Summary:
Michigan courts gave creditors more legal standing to sue for personal assets of borrower's non-performing assets. The court's decision was based on a "bad boy" clause in the mortgage contract.
Key Quotes:
...A Michigan appellate court recently upheld the decision of a lower court, which ruled that bondholders were justified in launching a personal lawsuit against strip-mall owner David Schostak after he defaulted on a loan, according to the Wall Street Journal.
The provision permits lenders to sue for personal assets and holdings if landlords engage in prohibited actions, such as fraud, the Journal explains. The bondholders argued that the provision was applicable for "special-purpose entities" that did not remain solvent, the newspaper adds.
Analysts say the ambiguity around the provision may spark more inquiries into how far-reaching the bad-boy clause should be.
Read the full article at Commercial Property Owners May Be Held Personally Liable For Sour Investments.
And when one considers that U.S. borrowers are falling behind on commercial real estate loans, to the tune of $58.1 billion, you can bet the bad-boy clause will be highly sought tool to recoup losses.
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga
Summary:
Michigan courts gave creditors more legal standing to sue for personal assets of borrower's non-performing assets. The court's decision was based on a "bad boy" clause in the mortgage contract.
Key Quotes:
...A Michigan appellate court recently upheld the decision of a lower court, which ruled that bondholders were justified in launching a personal lawsuit against strip-mall owner David Schostak after he defaulted on a loan, according to the Wall Street Journal.
The provision permits lenders to sue for personal assets and holdings if landlords engage in prohibited actions, such as fraud, the Journal explains. The bondholders argued that the provision was applicable for "special-purpose entities" that did not remain solvent, the newspaper adds.
Analysts say the ambiguity around the provision may spark more inquiries into how far-reaching the bad-boy clause should be.
Read the full article at Commercial Property Owners May Be Held Personally Liable For Sour Investments.
And when one considers that U.S. borrowers are falling behind on commercial real estate loans, to the tune of $58.1 billion, you can bet the bad-boy clause will be highly sought tool to recoup losses.
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga
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