If a lender forecloses on a partially developed property, and the lender chooses to complete the development, does the lender automatically become a successor in interest of the obligations and interests of the now defunct developer?
generally after forclosure all those who are noticed of the forclosure are extinguished. i am not sure what obligations you would be talking about.
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No, any subordinate liens against the property are extinguished by the foreclosure. The original developer probably is still personally responsible for the debt though.
Hope this perspective helps!
If the obligations and interests of the defunct developer run with the land by way of a recorded development agreement or conditional permits and entitlements, it is likely that the foreclosure would not have terminated any obligations and rights. Considerable and immediate due diligence needs to take place on the part of the lender to find out all specific obligations and interests. The lender may wish to start by procuring a preliminary title report (aka, title commitment) through a local title insurance company, which should turn up a wealth of information. The lender should hire qualified and fair real estate counsel.
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