FAQs with TLS: The team at Total Lender Solutions (TLS) answers your questions about the real estate market and commercial property foreclosures to keep you informed about the latest industry trends.
The Question:
How long does commercial foreclosure take in California?
The Short Answer:
Usually, it takes about 4 months to complete a non-judicial commercial foreclosure in California, and 2-3 years to complete a judicial foreclosure.
The time frame depends on:
- The stipulations laid out in the deed of trust
- The type of property you’re foreclosing on
- Whether or not you want to take the foreclosure all the way to public auction or if you prefer to reach a different solution.
Why It’s a Popular Question
When a commercial property enters foreclosure, it usually means that the real estate lender is not making money. Naturally, lenders want to get through the foreclosure process as quickly as possible to either a) get the borrower to resume making payments or b) sell the property to recuperate their investment.
The longer this process drags out, the longer the lender goes without receiving money and this could significantly impact the lender’s finances and their investment portfolio.
Will You Pursue a Judicial or Non-Judicial Commercial Foreclosure?
Unfortunately, there’s not really a “standard length of time” for California foreclosures.
Generally, it’s more difficult to foreclose on properties in which people are living. If there are people residing on the property, there are usually legal protections that make sure the tenants aren’t being unfairly evicted. California has stronger tenant protections than other states.
More importantly, the foreclosure time frame is dependent on whether or not there’s a power of sale clause. Power of sale clauses (which would be included in the deed of trust) give the lender the power to foreclose the property and sell the home if the borrower defaults.
In order to foreclose on a property non-judicially, there needs to be a power of sale clause in the mortgage contract.
Most California foreclosures are non-judicial foreclosures.
How Long Do Non-Judicial Commercial Foreclosures Take in California?
In a non-judicial commercial foreclosure, the lender is allowed to immediately foreclose on the property if the borrower defaults.
Here are a few key steps in the California commercial foreclosure process:
- The borrower may have a predetermined grace period when they can pay their missed installments. The grace period must end before the lender takes action.
- In California, the lender cannot issue a notice of default until they complete a foreclosure avoidance assessment to see if there’s any way the borrower can avoid default. To do this, the lender will make contact with the borrower. The borrower may consult advisors and then set a meeting with the lender, but the borrower must arrange this meeting within 14 days.
- If the lender can’t reach a solution in 30 days, or if the borrower fails to arrange a meeting, the lender can issue a Notice of Default (NOD).
- The lender must inform the borrower of the NOD within 10 days of issuing.
- The lender must wait 90 days before issuing a notice of sale. During this period, the borrower will have time to bring the loan current or find alternative solutions, such as a property sale or refinancing.
- Once the notice of sale is issued, it must be publicized for 3 consecutive weeks, as required by California law (21 days). Then a sale can be held.
- The lender can reinstate the loan up until 5 days before the public auction.
In most cases, the non-judicial foreclosure process takes about 4 months from preforeclosure to public sale. However, the process can be much shorter if the lender is able to resolve the situation with the borrower and avoid having to sell the property.
Judicial foreclosures involve lawsuits and the courts, so they can take as long as 2-3 years in California.
How To Speed Up a California Commercial Foreclosure
From our experience handling commercial foreclosures in California, we’ve found that the best way to speed up a foreclosure is to quickly make contact with the borrower to discuss your options. Solutions may include a loan modification, deed in lieu of foreclosure, or another option that will prevent you from going down the path of a public auction. Foreclosure firms, like Total Lender Solutions, can help you make these types of agreements with a distressed borrower.
We can also help you pursue the sale of the home, if that’s the foreclosure strategy you want to pursue. We’ll handle every step of the process, making sure that nothing gets missed so that you can recuperate your investment as quickly as possible.
Contact us today to learn more about how we can help you resolve a California commercial foreclosure.
