in a commercial foreclosure, are the tanants leases still valid? How can I get copies of the leases?

In Property Management - Asked by Mel F. - Oct 7, 2010
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Answer(s)

Scot E. H.
Broker/Agent
Glendale, AZ

If the foreclosing party accepts lease payments from the tenants it is assumed that the foreclosing party, has ratified the terms of the lease. The best place to get a copy of the lease is from the tenants.

Oct 7, 2010
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Paul R.
Broker/Agent
Denver, CO

It depends on what state you are in. In Colorado (my state), leases are no longer valid in the case of a foreclosure. The owner has the option, but not the requirement to continue honoring the leases. You should check with the real estate commission of your state for a definite answer to that question.
As stated by the previous answer, the tenant is the first place to look. The original Landlord who signed the lease would be a second place to look. The lender would be a third place to look as they often keep leases as part of their loan agreement and finally check the county records. Leases are sometimes recorded by tenants.

Oct 7, 2010
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Mark and Paul B.
Broker/Agent
Pocatello, ID

Like Paul R. says, you need to look at state laws. However, there are some situations where leases that are recorded may have a lien position priority over a lender. Usually this is rare and I would not count on it. In most cases commercial leases have a subordination to mortgage clause that automatically places the bank in top position. This is usually necessary to get financing on a building, except for in scenerios where the tenant is the primary source of value for a property, in which case, the lender may not have too big of an issue with the tenant lease overriding foreclosure. This would usually happen where the tenant is a company of stronger value or more importance than a bank, usually big corporate lessees. Most of the time, you would just want to refer to the lease.

Oct 7, 2010
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John W.
Broker/Agent
Bakersfield, CA

This is really a legal question and you should get an attorney to answer it on any individual case, however generally speaking. If the Lease is in place before the loan and the Lender didn't get the lessee to sign a document subordinating the lease to the loan. Then the lease would be valid against the foreclosing lender. All institutional lenders will make sure this is taken care of prior to funding the loan. Most good commercial leases cover this in the lease terms and the lessee must agree to a subordination clause, otherwise it would be very difficult to get financing.

Oct 8, 2010
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Russell N.
Property/Asset Manager
South Yarmouth, MA

If you can get your hands on the lease, it is usually specified in the lease agreement what happens. (At least in well written ones...) However, state laws may also determine and/or trump a lease agreement.

Oct 14, 2010
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Robert C.
Broker/Agent
Oakland, CA

On a side note. Recently rep a buyer on a comml bldg and during the transaction the bank stated the security deposit was forfeit in the foreclosure. An estoppel was sent to each tenant for their acknowledgement.

Apr 29, 2011
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