Don’t Forget the Tenant in Foreclosures
When undertaking a commercial foreclosure action, most lenders are familiar with the procedure of obtaining a title update to identify any other lienholders. Other lienholders are then named as parties in the foreclosure action in order to adjudicate their interest in the property. The end result is to ensure that all other interests are foreclosed off of the real estate so that at a sheriff’s sale (in Indiana) or a master commissioner’s sale (in Kentucky) clear title can be conveyed to the purchaser.
Aside from lienholders that are of record, another party that has an interest in the property and needs to be added to the foreclosure lawsuit is any tenant occupying the subject real estate. The existence and identity of a tenant is often difficult to ascertain since leases are not typically recorded. Nonetheless, in order to make sure that all interests in the real estate are foreclosed, the lender needs to engage in some additional due diligence in order to identify any tenants inhabiting the real estate and make sure that those individuals or entities are named in the foreclosure action.