A recent court order issued as part of an ongoing litigation involving a Manhattan hotel held that a mezzanine lender may proceed with a UCC foreclosure sale of the mezzanine loan collateral despite N.Y.E.O. 202.8, which prevents creditors from initiating judicial foreclosures. In “Distressed Real Estate During COVID-19: New York State Court Order Finds UCC Foreclosures Are Not Suspended by New York E.O. 202.8.,” colleagues Robert J. Grados, Caroline A. Harcourt and Jacob A. Axelrod addresses the court’s denial of injunctive relief to the UCC foreclosure and determination that damages were an adequate remedy may have significant effects even after the COVID-19 pandemic, and also to mezzanine borrowers considering their defenses to UCC foreclosure proceedings.
In the wake of the COVID-19 pandemic, the Supreme Court of Texas along with many Texas counties have issued moratoriums on evictions and foreclosures, the applicability of which remains varied and depends on local orders. In “Texas Restricts Evictions Due to COVID-19: Landlord Considerations,” colleagues Hannah Hollingsworth and Adam J. Weaver address that even though evictions are currently on hold, landlords should carefully review their leases and continue to fulfill their obligations thereunder in order to protect their rights once the courts have reopened.
In the wake of the COVID-19 pandemic, governments across the U.S. have issued moratoriums on evictions and foreclosures for residential and commercial properties and other restrictions on available remedies. In “National Landscape of COVID-19 Eviction and Foreclosure Moratoriums Continues to Shift,” colleagues Carmela D. Nicholas and Jeff Clare discuss how the limitations vary on whom they protect and what remedies are restricted, but they do not constitute forgiveness of the underlying obligations.
In many cases, borrowers and lenders are working together to weather this crisis. A forbearance agreement is often the first step—after a pre-negotiation agreement is entered into. In “Distressed Real Estate During the Coronavirus Pandemic: Tips for Negotiating Forbearance Agreements,” colleagues Caroline A. Harcourt and Zachary D. Bailey discuss how the coronavirus pandemic, stay-at-home orders and social distancing have put unprecedented strains on borrowers—hotels are closed or barely operational, retail properties are shuttered, tenants are not paying rents (and, in many jurisdictions, shielded from eviction)—yet owners must continue to meet their debt service payment (and other) obligations and fund their required reserves.
The coronavirus pandemic is resulting in a wave of forbearances and workouts. A frequent first step is the pre-negotiation agreement. In “Distressed Real Estate During the Pandemic: The Importance of Pre-Negotiation Agreements for Borrowers and Lenders,” colleagues Caroline A. Harcourt and Jacob A. Axelrod address that a good PNA should be quickly negotiated but carefully considered, getting both parties to substantive negotiations quickly. A PNA should not alter the status quo. Instead, it should ensure that the parties can share information and freely discuss terms.
The recent Spanish Peaks decision from the Ninth Circuit (covering Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington) deepens the split in case law on the ability to strip off leases in a landlord/borrower bankruptcy. This decision, which joins the Qualitech decision from the Seventh Circuit (covering Illinois, Indiana and Wisconsin), may significantly impact and complicate sales in bankruptcy of real property for lenders and non-debtor tenants alike.