Real Estate Rentals

Ilyce Glink: LLC partner getting runaround from lender about foreclosure

Q: I own an investment house in a limited liability company, or LLC, with a business partner. We are each 100 percent guarantors on the house loan.

The loan is currently only 16 days past due (it’s never been more than 30 days late, and we usually pay on time), yet the bank that just took over our original lender (which failed) has listed our property in the foreclosure section of the paper.

We have left several messages over the last couple months and even days to try and speak with a loan officer with the bank because we are getting to the point where we are running out of cash, but we have yet to hear back from anyone at the old bank or new one.

No notices or anything. To make matters worse, we just got finished adding a bathroom to the house because we were told by several Realtors that if we had an additional bath it would help sell it this spring.

This cost us more than $2,500, and if we knew this would happen (or even could happen) then we never would have done this latest improvement.

My business partner does have a personal loan with the same bank for a lake lot that he quit paying on some time ago. That loan is in his personal name, though.

Can the bank tie his personal bad loan to our LLC? Can it put it in the paper without even telling us or making any effort to communicate with us? Why would they have not come to me first as a guarantor to see if I wanted to pay off the note on the LLC?

I have called the bank and they tell me they can’t talk to me about the loan and to call their attorney. I have left the attorney a message without a response.

I need help because I don’t know what to do about this situation.

A: It sounds as though there might have been a mistake made with regard to which property is being listed for foreclosure sale. I’d go over to the bank and ask to speak with the general manager or branch manager. Try to go to the corporate headquarters for the bank, so you really speak to someone in charge. Bring your paperwork, and make sure your loan is current.

You may need to hire an attorney to help get this sorted out. And you need to have a sit-down with your partner to find out what else is going on with his finances. You and he are now tied together legally, and you should know what you’re facing.

By the way, what’s the deal with being 16 days late? Once you’re more than 10 or 15 days late on a loan (depending on the days given to you in the loan documents), you’re late. And my feeling is you should be paying your loan on the date it is due, which is the first of the month or whatever day of the month is set forth on the promissory note you signed. You should make a point of paying this loan on time, every month.

You should know that in some commercial transactions, lenders have the ability to make all loans they make to you work as if they were one big loan. That is to say, if you default on one loan, you effectively default on all the loans.

However, even if you defaulted on a loan on a different property, the lender would still have to initiate certain procedures to foreclose on this property and the other. For these legal issues, you’d need to talk to an attorney in your state who could represent you in your case. It may be that the lender has listed your property as a possible pre-foreclosure case but has not yet started foreclosure proceedings. If that’s the case, their notice to you about the foreclosure may be coming soon.

Finally, you can always go to your local courthouse and review the case filings to determine if the lender has initiated foreclosure proceedings against you. In some states, those filings are online and you can search your name to see if you are being sued.

Good luck.

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Tags: Partner, Partner Getting