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4 potential foreclosure defenses for business owners

On Behalf of | Jan 8, 2024 | real estate law

Foreclosure is a daunting prospect for any business owner.

However, there are effective strategies to defend against it and help businesses navigate this challenging situation.

1. Procedural errors

Challenges to the foreclosure process often stem from procedural missteps by the lending institution. These errors can occur during the filing of documents, serving notices or in the execution of required legal steps. Businesses should thoroughly review all foreclosure-related documents to identify any lapses in procedure.

2. Standing defense

A standing defense questions the legitimacy of the party initiating the foreclosure. Businesses facing foreclosure should scrutinize the chain of ownership of their mortgage note. Inaccuracies or gaps in the transfer of ownership can be grounds for challenging the standing of the foreclosing party.

3. Validity of loan documents

Examining the validity of loan documents is another important foreclosure defense for businesses. This involves a meticulous review of the loan agreement, promissory note and mortgage documents. Any discrepancies, inaccuracies or violations of lending laws within these documents can help challenge the foreclosure.

4. Breach of contract

Businesses can also defend against foreclosure by asserting a breach of contract by the lender. This defense hinges on demonstrating that the lending institution failed to uphold its obligations as outlined in the loan agreement. Whether it is a failure to provide adequate notice, improper application of payments or other breaches, businesses can leverage these violations as a strong defense strategy.

Across the U.S., foreclosures are on the rise. In September 2023, 36,684 U.S. properties had foreclosure filings, a 15% increase over 2022. While a challenging situation, businesses facing foreclosure have multiple defenses at their disposal.