As Property Values Rise, What Else Have we Seen?
By Todd A. Levine
Two weeks ago, my partner Alan blogged about some of the twists and turns he has seen in litigation as a result of rising property values in South Florida.
I too have seen some interesting tactics in my cases now that the properties in dispute are sky-rocketing in value.
For example, I have represented investors in real estate ventures and when the land values went south and the deals to buy the property did not close, my clients found themselves in litigation to recover their investments, which were not used to acquire the real estate as intended. Today, because the same properties are now worth significantly more money, my clients are either getting repaid or renegotiating their investment terms to be compensated for the rising real estate values. The same litigation that started during the 2009 recession is now taking an entirely different turn.
Another trend I have seen is local banks declaring non-monetary defaults for failing to provide financial statements or maintain certain debt ratios. These types of defaults used to occur all the time with banks generally looking the other way, particularly when the borrower was making timely payments on the loan. However, in the instances I have seen, banks are realizing that they have a valuable commercial asset on their hands, while simultaneously looking to upgrade their loan portfolios and minimize perceived risks. Oftentimes, borrowers feel pressure to settle with the banks and either refinance the property with another lender or pay off the loan in order to avoid foreclosure for a non-monetary default. As a result, I encourage my clients to ensure strict compliance with non-monetary loan requirements. Merely paying your monthly mortgage payments is not always enough to satisfy the banks any more and it is important to be prepared.