What happens to the income from a commercial property while it is in foreclosure?

Asked by Bryan, 22307 Mon Jun 27, 2011

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Robert Lepel…, Agent, Alexandria, VA
Wed Dec 18, 2013
Dear Bryan:

Most commercial and investment properties have an "assignment of rents" provision in the Deed of Trusts. It would be at the discretion of the lender whether or not they elect to enforce the assignment. So either read your deed of trust and note to see what it says, or ask your attorney.
Please let me know if you're interested in selling the property. Sincerely - Bob Lepelletier - Broker - Associate - Classic Realty (703) 310-7880 or bob@bobtherealtor.pro
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Eli Givoni-S…, , Boca Raton, FL
Tue Jun 28, 2011
In residential, we find many homeowners collect the rent and just don't pay the bank. The property owners keep the money. I would guess the same is happening with commerical. Not every file is the same. I would need more specifics on the property you are inquiring about. Feel free to call with any questions.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states

MARS Disclosure for General Commercial Communications
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
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Joanna Morris, Agent, Inverness, FL
Tue Jun 28, 2011
You really need to speak to an Attorney or at the very least your CPA.
0 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Mon Jun 27, 2011
Generally, whoever owns the property gets the income. Your question, however, does need to be directed to an attorney.

The moment it goes to foreclosure ownership transfers and therefore the right to the income transfers. I do know,however, that in Virginia a lease supercedes a sale but not a foreclosure. Therefore, before recent federal legislation technically when a residential property was foreclosed, the tenant no longer had rights to the property and the owner no longer had rights to the rent. If an owner accepted rent, he was creating a lease. By not accepting rent he could exercise his rights to possession of the property and easily have the tenants removed. Recent federal legislation trumps the state law and now there are laws to protect the tenants in those cases. But this is all residential. Commercial could be different, especially considering the federal laws were specifically for residential properties. So if state law does not differentiate, then it could be true that there is simply no lease in place from a legal standpoint and a new one needs to be negotiated. In the meantime, the owner has legal right to posession and the tenant has no obligation to pay rent. If the owner accepts the rent, a lease is likely being created by this act.

Did I help or confuse you more? Sorry.
Web Reference:  http://www.vickychrisner.com
0 votes
Carlos Carab…, Agent, McLean, VA
Mon Jun 27, 2011
Dear Bryan:

This is a Legal question you better consult with a Lawyer, but if the foreclosure process is no final the income from that commercial property belong to the legal owner until the final decree of Foreclosure, This can have some legal consequences that why is better to consult with an Attorney, if the property is already foreclosed the income most like is going to be use to pay the delinquent amount of the mortgage.

Carlos Caraballo
0 votes
Scott Godzyk, Agent, Manchester, NH
Mon Jun 27, 2011
If it is in foreclosure it will depend if the teh owner signed a UCC on the rents where the bank can step in and start collecting the rents and aplly it towards monies owed. If not the owner pockets it whole not paying any mortgage which doesnt seem right
Web Reference:  http://www.ScottSellsNH.com
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Kareem Flemi…, Agent, Alexandria, VA
Mon Jun 27, 2011
If the property is foreclosed on, then the owner technically does not own the property anymore therefore would not be entitled to collect the income produced by the property. If the property is in the foreclosure process, then the creditee (the person that owes to creditor) has the right to collect the income until final foreclosure process has concluded

I am a residential specialist in Real Estate but I think that it is fair to assume that the lien holder (The bank or creditors) have the right to collect the income.
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