 |
 |
|
 |
|
 |
|
|
|
|
|
|
|
| 1. What is a Phase 1 Environmental Site Assessment, and what should I know about it? |
| |
A “Phase I” is the initial review of environmental issues relating to a property. A commercial mortgage lender will typically require a Phase I in its loan commitment. An environmental engineering firm conducts a review of the site and issues a report to the parties. The firm reviews the site conditions, geology, past land usage and environmental records of the property, and then issues a report summarizing its findings. Depending on the recommendations set forth in the report, a lender may require a Phase II review, i.e. further soil sampling and analysis. |
| 2. Do commercial real estate lenders require a tenant estoppel and subordination? |
| |
Commercial real estate lenders usually require an estoppel and subordination agreement. This agreement confirms that rent has been paid by the tenant and the tenant has no claims against the landlord. The tenant is "estopped" from raising these issues once it has signed such an agreement. Typically, the commercial mortgage lender will require a Subordination, Nondisturbance and Attornment Agreement. This agreement provides that the lender’s rights under its mortgage are prior or subordinate to tenant’s rights, as the lender elects. It also preserves the lease upon foreclosure, thus maintaining rental income that is so important to the lender (lender will also require an assignment of rents from landlord). Finally, the attornment provision creates a direct relationship between lender and tenant. |
| 3. What is the Revised Article 9 of the Uniform Commercial Code (“UCC”)? |
| |
Article 9 of the UCC, dealing with secured transactions, applies to security interests in personal property or fixtures and which secures payment for a loan. The recently revised Article 9 makes important changes to the law regarding security interests in personal property. The “debtor” refers to the person who owes the secured obligation. The “secured party” is the person in whose favor a security interest is granted (usually a lender). Lenders in commercial transactions will usually require that the obligor sign a security agreement for personal property (i.e. furniture, fixtures and equipment). The lender’s interest is perfected by filing a UCC financing statement with the Secretary of the State and sometimes with the town clerk’s office. Under the former Article 9, the law focused on the location of the debtor’s property. With the revised Article 9, the focus is on the location of the debtor. There are many new changes that lenders and borrowers must review carefully with counsel prior to closing the loan. |
| 4. How important is post-closing work in a commercial lending transaction it? |
| |
Of critical importance. When closing a substantial commercial real estate or commercial lending transaction, we try very hard to leave nothing as an “open item” for post-closing attention. Inevitably, after the closing, it is easy to move on to the next file. Later on, when a problem occurs, or if a party is looking for documentation, it can be nightmare trying to recreate the transaction. We endeavor to minimize the number of post-closing loose ends. We also try to prepare and distribute a complete closing book with copies of the transaction. We work with the client to make sure UCC continuations and other renewals are properly diaried for attention. You can create the most wonderful set of loan documents in world, and yet have it all become meaningless if you haven’t properly recorded and perfected the security interests. |
|
|
|
|
