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Pre-Negotations Of Real Estate Loans

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Pre-Negotations Of Real Estate Loans.JPG
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Pre-Negotations Of Real Estate Loans

A pre-negotiation letter establishes the framework for the parties to discuss either a loan modification, loan workout, or some other option. It is commonly entered into if the borrower requests a loan workout or forbearance following one or more default notices but before the start of formal enforcement proceedings. This Standard Document has integrated drafting notes and important explanations and drafting tips. Pre-negotiation letters state the rights and obligations of both lender and borrower in the context of a loan modification or workout and confirm the ground rules governing modification or workout discussions. Once executed, pre-negotiation letters can facilitate open discussion and negotiation among interested parties with respect to a proposed loan modification or workout before any modification of the loan terms is reduced to a written agreement. With a well drafted pre-negotiation letter, the parties will not unknowingly waive or compromise valuable rights contained in the loan documents. A construction budget bust, lease-up and rental rates below projections, sales prices below pro-forma, a maturity date approaching without take-out refinancing any one could mean the construction loan made twenty-four months ago is not in good shape and a commercial borrower may face the impending risk of defaulting on its loan. To potentially avoid this scenario, an existing borrower may prospectively ask its lender the following questions: Would the lender consider refinancing the debt or would the lender consider amending the loan terms to help avoid a default? Since most traditional lenders are not in the business of acquiring real estate, when a borrower approaches, most lenders should entertain a mutually satisfactory resolution with a borrower but not before the parties have entered into a pre-negotiation letter.

Among some of the common provisions that most lenders seek in a pre-negotiation letter are:
• That the negotiations were requested by borrower, are completely voluntarily, and may be terminated by either party at any time, without recourse or obligation. This provision permits both parties to maintain all viable options, whether it be borrower pursuing other refinancing opportunities or lender ceasing negotiations and either selling the loan, declaring a default, accelerating the debt, or exercising other remedies.
• That borrower acknowledges the status of its current obligations under the loan. This provision would acknowledge any late payments which may be deemed a default or any other circumstances that necessitate a loan modification or workout. While it is unlikely that a borrower would expressly acknowledge a default in a pre-negotiation letter, a lender might require a simple acknowledgment of the facts contributing to a possible loan modification, such as missed or late payments.
• That all parties agree that any loan modification will not be binding until all terms are reduced to writing. All parties should understand that no modifications of terms which may be discussed will be effective until they enter into a formal written modification. It should also be clear that there is no obligation of either party to modify, amend or restructure the loan or the transaction in any manner.
• That the loan documents remain in full force and effect, unmodified except as provided in writing. A lender traditionally reserves all rights under the loan documents so that loan modification negotiations do not impair lender’s ability to exercise any rights or remedies under the loan documents. It is also important that no implied or deemed waiver of any of lender’s rights occurs.
• That the borrower retains the right to possess the collateral prior to a default. Since borrower already possesses the collateral and the lender is not waiving its right to foreclose on the collateral and obtain possession in the future, this provision provides needed certainty to the borrower.
• That borrower pays all of lender’s fees in connection with any modification or workout, or related negotiations. Borrower’s early agreement to pay lender’s fees avoids the issue arising at a more sensitive point in the negotiations, when any surprise could derail a positive resolution.
• That the underlying collateral securing the loan remains unencumbered by any lien other than the mortgage. A lender has an interest in protecting the priority of its rights in the real property and ensuring that the property is maintained free from liens. This assurance would most likely be available in the context of a permanent loan rather than a construction loan since presumably real property subject to a permanent loan would be generating some current cash flow to pay expenses and avoid liens.
• That the content and mere existence of negotiations is inadmissible in court. A lender may want to include such a provision consistent with the rules of evidence as generally applied to avoid a borrower’s attempt to introduce as evidence in legal proceedings lender’s negotiation of certain terms prior to cessation of talks and initiation of lender’s remedies.
• That all future claims relating to oral or written statements made during negotiations are waived and released. The parties should be free to speak openly and put forth any reasonable offer, proposal, or counteroffer without fear of any binding statements prior to any verbal agreements being reduced to writing.
• That certain individuals in the negotiations are the authorized representatives of borrower and lender, respectively. The parties should avoid creating a situation where one party may speak with different personnel of the other and either receive inconsistent information or negotiate with a person who lacks ultimate authority to agree to deal terms.
• If the loan is guaranteed, the guarantor should execute or acknowledge the pre-negotiation letter. It is important to ensure that the guarantor is aware of the loan’s and/or borrower’s status, as the guarantor may bear ultimate responsibility for the debt and a lender will want to avoid guarantor’s assertion of any surety ship defenses.

While this list is by no means exhaustive, it is meant as a guide for loan parties to consider issues that should be expressly stated in writing and agreed upon prior to a loan modification or workout. For the lender, it is important to include these provisions in the pre-negotiation letter to avoid pitfalls that might compromise its objectives and to clearly retain all rights and remedies afforded by the loan documents. A sophisticated borrower’s counsel may request that the lender expressly forebear from foreclosing on the collateral and negotiate for a forbearance provision in the pre-negotiation letter. A lender should avoid including any forbearance provisions in the pre-negotiation letter. The pre-negotiation letter and the forbearance agreement are typically executed independently at different stages of the process. The pre-negotiation letter sets the ground rules for the loan modification or workout negotiation, with the loan parties possibly entering into a forbearance agreement as a result of such negotiation. An appropriately worded pre-negotiation agreement sets the ground rules for these discussions and allows the parties to discuss the default and potential solutions and exchange documentation or information, without a party’s actions or words being used against it. The pre-negotiation agreement thus facilitates an exploration of the feasibility of a loan modification. As with most aspects of commercial real estate loan transactions, the contents of a prenegotiation agreement may vary due to the parties’ respective bargaining positions and local law considerations.

Although not an exhaustive list of all topics, issues and considerations, this article will explore some key components to a pre-negotiation agreement. In general, pre-negotiation agreements should begin by clearly identifying the loan transaction, the parties thereto, and the documents that evidence the transaction. A lender and borrower will be parties to a prenegotiation agreement. A guarantor may be a party as well, or a guarantor may join in as to only certain provisions. The pre-negotiation agreement should then expressly set forth its purpose, i.e., to make clear that the discussions that are about to take place or, in some instances, which have already taken place are to be considered settlement negotiations and, accordingly, shall not be admissible as evidence on any issue before any court. For example, the agreement may provide: “In order to ensure that our discussions will be as open and productive as possible, the parties are executing below to confirm our mutual understanding that all discussions concerning the loan, the loan documents and the property will be undertaken with a view toward settlement and compromise.” This concept is often supplemented by a statement that the scope of the agreement is intended to be as broad as possible under applicable law including the restrictions on admissibility contained in Federal Rules of Evidence 408 and all applicable state and common law privileges.

The parties should then expressly acknowledge and agree that they will not make any claims or assertions inconsistent with this concept in any proceeding relating to the loan or the loan documents. A lender seeking to sell a defaulted loan must be particularly sensitive to this provision. Otherwise, it may preclude itself from sharing information needed by a prospective purchaser of the defaulted loan. A borrower party may not want any information shared with such a prospective purchaser. The parties can, of course, agree to waive any confidentiality provision with respect to certain specified information as well. Depending upon the negotiation dynamics in a particular transaction, an express acknowledgment of default(s) and/or a release of a lender (and/or its servicer) may become part of a pre-negotiation agreement. While borrowers and guarantors will seek to retain all of their rights during the discussion process, lenders will be looking to get confirmation of the existing default(s) and confirmation that no other defaults exist and that the borrower parties have no defenses against the lender. Pre-negotiations agreements will often contain other provisions that may be crucial to one side or the other of a loan transaction. For example, a lender may insist on adding generally customary language which specially provides that it may exercise rights and remedies at any time (which it may do for a variety of reasons while discussions are on-going including, potentially, statute of limitation considerations). In situations where a business has defaulted or will default on a commercial loan, an attorney can provide assistance in negotiating with a bank or lender to achieve a settlement. The circumstance of the loan, primarily how well secured the loan is, will impact the lender’s flexibility and play a role in the range of options available. An attorney with a thorough understanding of banking, debt collection, securitization and finance law can guide your organization through the often-complicated process and negotiate on your behalf to achieve the best possible results. Our attorneys also have insight into the priorities and motivations of banks and other mortgagees, and are thus well-positioned to negotiate effectively. With a favourable lump-sum settlement or a new payment plan secured, you will once again have the freedom to focus on operating and growing your business.

When a business has trouble making payments on a commercial loan, a loan modification may be the answer. An experienced commercial loan modification attorney can assess the agreements and transaction history for leverage such as contract or legal violations. At the same time, the attorney can take parallel steps to give your company the time required to negotiate for a loan modification. Foreclosure can devastate a business, but alternative resolutions are often available. Given the complexity of banking and debt collection laws and the delicacy of the negotiation process, obtaining assistance from an attorney experienced in this arena is typically the best way to modify a commercial loan. A forbearance agreement allows the lender to preserve its rights while allowing the business time to cure the default. Typically, a lender will be more likely to agree to forbearance in a situation where foreclosure is not likely to be profitable, such as when the loan is under secured. Under a forbearance agreement, the lender agrees to delay foreclosure for a specified time period in exchange for the borrower taking some type of action to cure the default. Depending on the specifics of the loan and the property in question, this may include listing the property for sale, liquidating other assets to bring the loan current, or securing alternative financing. However, a borrower entering into a forbearance agreement without knowledgeable legal advice may inadvertently compromise important legal rights.

An experienced commercial real estate lawyer can assess the underlying facts of the mortgage to determine whether there is a legal defense to foreclosure, and counsel for or against signing a forbearance agreement on that basis. If forbearance is the right answer, having an attorney at the table when negotiating a forbearance agreement often results in far more favorable deals for clients. While most commercial real estate loan solutions are geared toward preventing foreclosure, there are some circumstances under which it is preferable for the company to move or to consolidate operations and free itself from the ongoing payment obligation. In many cases, there is a better way to achieve that result than standing by and allowing the lender to foreclose.

A deed in lieu of foreclosure may allow the company to walk away from its commercial real estate loan with less complication and less expense. The lender will often agree because this process wraps up the transaction more quickly and saves the expense of a foreclosure action. When a borrower and lender agree to a deed in lieu of foreclosure, the borrower signs the deed to a property over to the lender in satisfaction of the loan.

Commercial mortgage agreements commonly contain a provision that allows the lender to appoint a receiver upon certain triggering events. It is important that a company entering into a commercial mortgage is aware of and understands the circumstances that may trigger appointment of a receiver, and that a company finding itself unable to keep mortgage payments current gets advice as to its options and the likelihood that a receiver will be appointed as soon as possible. Receivers are most frequently appointed when the property is income-generating. For example, if the owner of an apartment complex defaults on the mortgage, the lender may pursue appointment of a receiver to manage the property and collect rents. If your organization is facing commercial property receivership, an experienced commercial real estate lawyer can explain the options available to you and help to ensure that your interests are protected. Like a deed in lieu of foreclosure, pre-foreclosure sales may provide a means of resolving the outstanding debt while allowing both the borrower and the lender to avoid costly and time-consuming legal procedures.

Utah

From Wikipedia, the free encyclopedia
 

Coordinates39°N 111°W

Utah
State of Utah
Nickname(s)

“Beehive State” (official), “The Mormon State”, “Deseret”
Motto

Industry
Anthem: “Utah…This Is the Place
Map of the United States with Utah highlighted

Map of the United States with Utah highlighted
Country United States
Before statehood Utah Territory
Admitted to the Union January 4, 1896 (45th)
Capital
(and largest city)
Salt Lake City
Largest metro and urban areas Salt Lake City
Government

 
 • Governor Spencer Cox (R)
 • Lieutenant Governor Deidre Henderson (R)
Legislature State Legislature
 • Upper house State Senate
 • Lower house House of Representatives
Judiciary Utah Supreme Court
U.S. senators Mike Lee (R)
Mitt Romney (R)
U.S. House delegation 1Blake Moore (R)
2Chris Stewart (R)
3John Curtis (R)
4Burgess Owens (R) (list)
Area

 
 • Total 84,899 sq mi (219,887 km2)
 • Land 82,144 sq mi (212,761 km2)
 • Water 2,755 sq mi (7,136 km2)  3.25%
 • Rank 13th
Dimensions

 
 • Length 350 mi (560 km)
 • Width 270 mi (435 km)
Elevation

 
6,100 ft (1,860 m)
Highest elevation

13,534 ft (4,120.3 m)
Lowest elevation

2,180 ft (664.4 m)
Population

 (2020)
 • Total 3,271,616[4]
 • Rank 30th
 • Density 36.53/sq mi (14.12/km2)
  • Rank 41st
 • Median household income

 
$60,365[5]
 • Income rank

 
11th
Demonym Utahn or Utahan[6]
Language

 
 • Official language English
Time zone UTC−07:00 (Mountain)
 • Summer (DST) UTC−06:00 (MDT)
USPS abbreviation
UT
ISO 3166 code US-UT
Traditional abbreviation Ut.
Latitude 37° N to 42° N
Longitude 109°3′ W to 114°3′ W
Website utah.gov
Utah state symbols
Flag of Utah.svg

Seal of Utah.svg
Living insignia
Bird California gull
Fish Bonneville cutthroat trout[7]
Flower Sego lily
Grass Indian ricegrass
Mammal Rocky Mountain Elk
Reptile Gila monster
Tree Quaking aspen
Inanimate insignia
Dance Square dance
Dinosaur Utahraptor
Firearm Browning M1911
Fossil Allosaurus
Gemstone Topaz
Mineral Copper[7]
Rock Coal[7]
Tartan Utah State Centennial Tartan
State route marker
Utah state route marker
State quarter
Utah quarter dollar coin

Released in 2007
Lists of United States state symbols

Utah (/ˈjuːtɑː/ YOO-tah/ˈjuːtɔː/ (listen) YOO-taw) is a landlocked state in the Mountain West subregion of the Western United States. It is bordered to its east by Colorado, to its northeast by Wyoming, to its north by Idaho, to its south by Arizona, and to its west by Nevada. Utah also touches a corner of New Mexico in the southeast. Of the fifty U.S. states, Utah is the 13th-largest by area; with a population over three million, it is the 30th-most-populous and 11th-least-densely populated. Urban development is mostly concentrated in two areas: the Wasatch Front in the north-central part of the state, which is home to roughly two-thirds of the population and includes the capital city, Salt Lake City; and Washington County in the southwest, with more than 180,000 residents.[8] Most of the western half of Utah lies in the Great Basin.

Utah has been inhabited for thousands of years by various indigenous groups such as the ancient Puebloans, Navajo and Ute. The Spanish were the first Europeans to arrive in the mid-16th century, though the region’s difficult geography and harsh climate made it a peripheral part of New Spain and later Mexico. Even while it was Mexican territory, many of Utah’s earliest settlers were American, particularly Mormons fleeing marginalization and persecution from the United States. Following the Mexican–American War in 1848, the region was annexed by the U.S., becoming part of the Utah Territory, which included what is now Colorado and Nevada. Disputes between the dominant Mormon community and the federal government delayed Utah’s admission as a state; only after the outlawing of polygamy was it admitted in 1896 as the 45th.

People from Utah are known as Utahns.[9] Slightly over half of all Utahns are Mormons, the vast majority of whom are members of the Church of Jesus Christ of Latter-day Saints (LDS Church), which has its world headquarters in Salt Lake City;[10] Utah is the only state where a majority of the population belongs to a single church.[11] The LDS Church greatly influences Utahn culture, politics, and daily life,[12] though since the 1990s the state has become more religiously diverse as well as secular.

Utah has a highly diversified economy, with major sectors including transportation, education, information technology and research, government services, mining, and tourism. Utah has been one of the fastest growing states since 2000,[13] with the 2020 U.S. census confirming the fastest population growth in the nation since 2010. St. George was the fastest-growing metropolitan area in the United States from 2000 to 2005.[14] Utah ranks among the overall best states in metrics such as healthcare, governance, education, and infrastructure.[15] It has the 14th-highest median average income and the least income inequality of any U.S. state. Over time and influenced by climate changedroughts in Utah have been increasing in frequency and severity,[16] putting a further strain on Utah’s water security and impacting the state’s economy.[17]

Etymology

The name Utah is said to derive from the name of the Ute tribe, meaning ‘people of the mountains’.[18] However, no such word actually exists in the Utes’ language, and the Utes refer to themselves as Noochee. The meaning of Utes as ‘the mountain people’ has been attributed to the neighboring Pueblo Indians,[19] as well as to the Apache word Yuttahih, which means ‘one that is higher up’ or ‘those that are higher up’.[18] In Spanish, it was pronounced Yuta; subsequently, English-speaking people may have adapted the word as Utah.

 

Geography and geology

 

Utah county boundaries

Utah is known for its natural diversity and is home to features ranging from arid deserts with sand dunes to thriving pine forests in mountain valleys. It is a rugged and geographically diverse state at the convergence of three distinct geological regions: the Rocky Mountains, the Great Basin, and the Colorado Plateau.

Utah covers an area of 84,899 sq mi (219,890 km2). It is one of the Four Corners states and is bordered by Idaho in the north, Wyoming in the north and east, by Colorado in the east, at a single point by New Mexico to the southeast, by Arizona in the south, and by Nevada in the west. Only three U.S. states (Utah, Colorado, and Wyoming) have exclusively latitude and longitude lines as boundaries.

One of Utah’s defining characteristics is the variety of its terrain. Running down the middle of the state’s northern third is the Wasatch Range, which rises to heights of almost 12,000 ft (3,700 m) above sea level. Utah is home to world-renowned ski resorts made popular by light, fluffy snow and winter storms that regularly dump up to three feet of it overnight. In the state’s northeastern section, running east to west, are the Uinta Mountains, which rise to heights of over 13,000 feet (4,000 m). The highest point in the state, Kings Peak, at 13,528 feet (4,123 m),[43] lies within the Uinta Mountains.

At the western base of the Wasatch Range is the Wasatch Front, a series of valleys and basins that are home to the most populous parts of the state. It stretches approximately from Brigham City at the north end to Nephi at the south end. Approximately 75 percent of the state’s population lives in this corridor, and population growth is rapid.

Western Utah is mostly arid desert with a basin and range topography. Small mountain ranges and rugged terrain punctuate the landscape. The Bonneville Salt Flats are an exception, being comparatively flat as a result of once forming the bed of ancient Lake Bonneville. Great Salt Lake, Utah LakeSevier Lake, and Rush Lake are all remnants of this ancient freshwater lake,[44] which once covered most of the eastern Great Basin. West of the Great Salt Lake, stretching to the Nevada border, lies the arid Great Salt Lake Desert. One exception to this aridity is Snake Valley, which is (relatively) lush due to large springs and wetlands fed from groundwater derived from snow melt in the Snake RangeDeep Creek Range, and other tall mountains to the west of Snake Valley. Great Basin National Park is just over the Nevada state line in the southern Snake Range. One of western Utah’s most impressive, but least visited attractions is Notch Peak, the tallest limestone cliff in North America, located west of Delta.

Much of the scenic southern and southeastern landscape (specifically the Colorado Plateau region) is sandstone, specifically Kayenta sandstone and Navajo sandstone. The Colorado River and its tributaries wind their way through the sandstone, creating some of the world’s most striking and wild terrain (the area around the confluence of the Colorado and Green Rivers was the last to be mapped in the lower 48 United States). Wind and rain have also sculpted the soft sandstone over millions of years. Canyons, gullies, arches, pinnacles, buttes, bluffs, and mesas are the common sights throughout south-central and southeast Utah.

This terrain is the central feature of protected state and federal parks such as ArchesBryce CanyonCanyonlandsCapitol Reef, and Zion national parks, Cedar BreaksGrand Staircase–EscalanteHovenweep, and Natural Bridges national monuments, Glen Canyon National Recreation Area (site of the popular tourist destination, Lake Powell), Dead Horse Point and Goblin Valley state parks, and Monument Valley. The Navajo Nation also extends into southeastern Utah. Southeastern Utah is also punctuated by the remote, but lofty La SalAbajo, and Henry mountain ranges.

Eastern (northern quarter) Utah is a high-elevation area covered mostly by plateaus and basins, particularly the Tavaputs Plateau and San Rafael Swell, which remain mostly inaccessible, and the Uinta Basin, where the majority of eastern Utah’s population lives. Economies are dominated by mining, oil shaleoil, and natural gas-drilling, ranching, and recreation. Much of eastern Utah is part of the Uintah and Ouray Indian Reservation. The most popular destination within northeastern Utah is Dinosaur National Monument near Vernal.

Southwestern Utah is the lowest and hottest spot in Utah. It is known as Utah’s Dixie because early settlers were able to grow some cotton there. Beaverdam Wash in far southwestern Utah is the lowest point in the state, at 2,000 feet (610 m).[43] The northernmost portion of the Mojave Desert is also located in this area. Dixie is quickly becoming a popular recreational and retirement destination, and the population is growing rapidly. Although the Wasatch Mountains end at Mount Nebo near Nephi, a complex series of mountain ranges extends south from the southern end of the range down the spine of Utah. Just north of Dixie and east of Cedar City is the state’s highest ski resort, Brian Head.

Like most of the western and southwestern states, the federal government owns much of the land in Utah. Over 70 percent of the land is either BLM land, Utah State Trustland, or U.S. National ForestU.S. National ParkU.S. National MonumentNational Recreation Area or U.S. Wilderness Area.[45] Utah is the only state where every county contains some national forest.[46]

Salt Lake City, Utah

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