ALI-ABA Course of Study Commercial Real Estate Defaults ...

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64 Lien 8.20 Discharge Issues 8.21 Equitable Subordination 8.22 Successor Liability 8.23 Bar Dates 8.23.1 Bank 8.24 Section 365 Rejection of Leases and Executory Agreements 8.24.1 Rejection by Debtor Lessee 8.24.2 Rejection by Debtor Lessor 8.24.3 Assumption 8.24.4 REA - CC&Rs 8.25 Letters of Credit 8.26 Ipso Facto Clauses 8.27 Partnership Issues 8.28 Substantive Consolidation 9.0........................................................................... Effectiveness of Assignment of Future Rents 9.1 Generally 9.2 Notices to Tenant of Rent Assignment 9.3 Hotel Receipts 10.0........................................................... Review of Condominium and P.U.D. Documentation 10.1 Declarant's Rights 10.2 Mortgagee Provisions 10.3 Association Financial Statements 10.4 Association Activities 10.5 Developer Assessments 10.6 Association's Director Liability 10.7 Timeshare Issues 11.0............................................................................................... Borrower's Tax Circumstances 11.1 Issue 12.0.........................................................................................................................Advice to Client DSC:767996.4 vii 4/4/2006 3:55 PM Copyright 1996, 2002 Marvin Garfinkel All Rights Reserved
65 REAL ESTATE DEFAULTS INVESTIGATION CHECK LIST FOR LENDER'S COUNSEL (ANNOTATED) 2 By Marvin Garfinkel NOTE: A separate Investigation Check List should be prepared for each material real estate parcel. 0.0 Immediate Attention 0.1 Collateral 0.1.1 Primary Collateral - List mortgages, notes 3 , personal property security interests, securities provided by parties other than the debtor, letters of credit, guarantees, pledges, cash collateral accounts and any other primary collateral. 0.1.2 Ancillary Collateral - List ancillary collateral including rent and lease assignments, security agreements, assignments of management and construction related documents, hotel license, liquor licenses, escrow accounts, franchise and management agreements and related nondisturbance and recognition agreements, comfort letters, partnership interests 4 , etc. 0.2 Conflicts Issues - Seek to determine identity of principals of borrower, parties to any syndication, other lenders that may be impacted by the various possible outcomes, lessees, other lien holders, significant creditors of borrower, and others that may be impacted by outcome of default. It is important that this be done at the earliest possible occasion as the identification of a conflict later in the case may prove very costly to the 2 This checklist is regularly updated by the author to reflect his own experience and that of users of this checklist. Comments are therefore solicited since this document is continuously being revised. At any time there may be incomplete references and footnotes, unofficial citations that should be superseded with official citations, etc. Reference to "Dunaway Text" is to Dunaway, The Law of Distressed Real Estate (Clark Boardman Collaghan 1985-1997) which includes a copy of this Check List updated from time to time. 3 Is note recourse or exculpated - if exculpated what are exceptions to the exculpation 4 If a lender holds a lien on the ownership interests in borrower it may discourage initiation by the borrower of Chapter Proceedings. Such security interest may be based on guarantees by partners of borrower of the borrower's obligation to the lender with such guarantee collateralized by a lien on the partner's interest in the borrower. See U.C.C. §8-321 and definitions of "Security", "Certificated Security" and "Uncertificated Security" at U.C.C. §8-102. Under U.C.C. §8-321 no filling is required to perfect a security interest in a "Security" as defined at U.C.C. §8-102. Under U.C.C. §8-313 the Security Interest in an Uncertified Security is perfected by registration with the issuer. Thus if a partnership interest is for purposes of the U.C.C. a "Security" the Security interest is perfected by notice or registration with the partnership otherwise Article 9 applies and a U.C.C. 1 is probably appropriate. If in doubt (as is usually the case) both approaches are usually followed. See item 5.11 below on foreclosing partnership interests. DSC:767996.2 4/4/2006 3:55 PM Copyright 1996 – 2002 Marvin Garfinkel All Rights Reserved
Page 1 and 2: 57 ALI-ABA Course of Study Commerci
Page 3 and 4: 59 1.5 Other Lenders and Participan
Page 5 and 6: 61 5.0.............................
Page 7: 63 8.0 Relevant Bankruptcy Consider
Page 11 and 12: 67 available Is it feasible in cont
Page 13 and 14: 69 both for payment on demand and a
Page 15 and 16: 71 1.6 Title Insurer Consider possi
Page 17 and 18: 73 3.1 Mortgages, Deeds of Trust an
Page 19 and 20: 75 3.3.1 Are guarantor's liabilitie
Page 21 and 22: 77 those jurisdictions that permit
Page 23 and 24: 79 3.5 Closing Attorneys Summary of
Page 25 and 26: 81 3.8.3 Rights of Parties in Posse
Page 27 and 28: 83 Will the purpose of the proposed
Page 29 and 30: 85 the issuer must honor the draft
Page 31 and 32: 87 full disclosure to the borrower
Page 33 and 34: 89 4.2.3 Security Deposits - Determ
Page 35 and 36: 91 4.7.1 Contamination - Hazardous
Page 37 and 38: 93 to cure or mitigate and construc
Page 39 and 40: 95 5.3.3 Determine whether under th
Page 41 and 42: 97 5.10 Right to Financial Privacy
Page 43 and 44: 99 5.13.3 D'Oench has been held not
Page 45 and 46: 101 5.17 Choice of Forum and of Law
Page 47 and 48: 103 5.22 Amount Due Issues. 5.22.1
Page 49 and 50: 105 further a corporate purpose or
Page 51 and 52: 107 of substantial punitive damages
Page 53 and 54: 109 (3) The trend of the cases may
Page 55 and 56: 111 (1) Equal Credit Opportunity Ac
Page 57 and 58: 113 also establish that the lender
Page 59 and 60:
115 7.1.16 Loan Prohibited by Borro
Page 61 and 62:
117 7.11.1 If the dispute involves
Page 63 and 64:
119 See 9.0 below on effect of assi
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121 362(b)(4) exempt from the stay.
Page 67 and 68:
123 8.6.5 Although foreclosures 283
Page 69 and 70:
125 whether partial interest deferr
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127 8.9.2. §506(b) Fees and Costs
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129 8.11.4 Successive Chapter 11 fi
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131 8.13.7 New Value Rule. 332 8.14
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133 false representation or actual
Page 79 and 80:
135 (2) Compensate non-debtor party
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137 8.26 Ipso Facto Clauses. Under
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139 mortgage that has obtained an a
Page 85 and 86:
141 10.2 Mortgagee Provisions. Desc
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ALI-ABA Course of Study Commercial Real Estate Defaults ...

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