A Single Asset Real Estate case usually involves a commercial building, apartment complex, or even vacant land.  Generally, a Single Asset Real Estate case concerns a piece of property, or a project, owned by an an entity (a limited partnership, or more commonly now, a limited liability company).  The entity’s sole purpose is to operate the property with funds generated by the property.  

The most important creditor in a Single Asset Real Estate case is the entity’s mortgage lender.  In some deals, the entity has secured financing from second-tier or mezzanine lenders.  The Singe Asset Real Estate entity may also owe debts for taxes, utilities, or property management fees. 

Under the Bankruptcy Code, a Single Asset Real Estate case has the following three characteristics:

• a single piece of real property or project (excluding residential property with less than four units);
• which generates substantially all of the income for the debtor (who is not a family farmer); and
• the company (or debtor) operates no substantial business other than operating the property or project.

A Single Asset Real Estate case is not limited to small projects.  It can include large commercial properties.  Even a large shopping center worth millions of dollars could be Single Asset Real Estate case.  If you are the member or owner of a Single Asset Real Estate entity, there are benefits to filing chapter 11 case.  However, you have a more difficult road than a typical debtor in chapter 11.  Our third and final blog in this series will explore the benefits and difficulties associated with a Single Asset Real Estate case.  

We at Lakelaw know the details of Chapter 11.  David Leibowitz even taught the course on Real Estate Bankruptcy Law to graduate law students at the LL M level at John Marshall Law School.  He was recommended for the job there by former Bankruptcy Judge Ronald Barliant as a result of his practice before him.  Jonathan Brand has had a wide-range of exposure to real estate cases not only at Lakelaw but also during his tenure as a law clerk with two different bankruptcy courts.  Lakelaw is available to answer any of your concerns related to Single Asset Real Estate cases or your other bankruptcy needs.

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These days, clients are finding they must give up their homes.  Frequently, they live in a condominium or in a home where there is a homeowners’ association.  These cases pose a hidden trap in bankruptcy.

Generally, bankruptcy leads to a discharge of all debts.  However, there is a cut-off  date.  Bankruptcy only discharges debts which are incurred up to the date of the petition.  If  you decide to leave your condominium or home after you file the bankruptcy, you will be relieved of any debt to your mortgage lender.  That will be discharged.  But you won’t be relieved of any future debt to the condominium association or the homeowners’ association. 

Let’s say you file a bankruptcy on March 30.  You decide you are going to give up your condo.  It’s in foreclosure.  You need to move.  So you move instead of facing eviction.  Seems reasonable.  But condo associations and homeowner associations need cash.  And the mortgage company is not liable for the assessments until the foreclosure sale is done and until they actually receive the deed to the property.  So if you don’t pay these items after bankruptcy, the association can and often will sue you, especially in Illinois.

So it may benefit you to stay in the house or condominium after your bankruptcy.  Don’t pay the mortgage.  You are no longer liable for it.  Do pay your insurance.  And do pay your condo or homeowner’s association assessments.  Think of these expenses as rent.  You’ll avoid being sued for these items and you can take your time in preparing to move on in your life.

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A new Illinois statute, effective January 1, 2009, requires that lenders give homeowners special notices in forclosure cases, both in English and Spanish.  Click here to read the Illinois Mortgage Foreclosure Law.  These notices must inform the defendant that:

• As lawful occupants, they have the right to live in the home until a judge enters an order of possession
• The homeowner continues to own the home until the court rules otherwise
• Homeowners can get professional guidance from a lawyer or certified housing counsellor but should PROCEED WITH CAUTION when dealing with others who say that they are offering help
• The mortgage company doesn’t really want to foreclose on the house if there is any way to avoid it

In addition, the name of the mortgage lender must be set out in large type.  The lender must provide a pay-off statement at no cost.  If the lender wilfully fails to deliver an accurate statement within 10 days, the lender is liable for actual damages or statutory damages not less than $500.

This statute gives borrowers important rights.  We at Lakelaw are ready, willing and able to help Illinois homeowners protect their rights and save their homes.

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