Commercial RE Investment: 3rd Lien

[VAnnS]

I invested Mom's money in a new building construction as 3rd lienholder. I just learned that the future tenant is anticipating the owner not paying the first payment to the first lienholder (due Oct 1 but grace period until Oct 13), so he arranged with this lienholder to take the property/business away from him (my guess is this is similar to a hostile takeover in the stockmarket, but in the commercial RE realm). The owner told me that if this happens the other lienholders are stuck. Is this true? Also, the tenant said he said a certified letter to the owner. What would be the purpose of this? Is this a foreclosure?

The owner says he has a backup person who will be a tenant, take on a business loan to payoff the first lienholder. This seems to be the only out of a horrible situation. Can a $3M loan be processed in just 2 weeks?

My involvement was meant to be a short term loan that began a year and a half ago. I haven't been paid anything on this, as the interest was to be paid with principal at the end.

Mom died in the spring and I've done part of the probate -- Temporary Administration to sign a sub agreement, which expires Nov 28. So far I've told the probate lawyer to wait on my case until Nov 1st. If money is completely gone, there's no point in finishing the probate process. This lawyer thought that all lienholders have rights, but said he wasn't familiar enough with RE law.

 

[jharris352]

Lienholders have rights

Your attorney is correct, though if you have a significant amount of money in this deal you should get another attorney to protect your rights. If the first lien holder goes through a foreclosure process and the property is sold at public auction then liens are paid off in order and any deficiencies are STILL OWED by the business or owner or both depending on personal guarantees. The property will be free and clear of the liens after foreclosure.

If the first lien holder is attempting to take a deed-in-lieu of foreclosure then they take that deed subject to the junior lien holders so you still have your stake in the real estate. You need professional, state, specific advice. I am qualified to give that advice (with over 15 years in mortgage/real estate) but this isn't the forum to get that specific and I'm not sure of your state's rules.

Get an attorney, you have rights.