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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 90310
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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Hi, Paul. My corporation is at the beginning stages of foreclosure,

Resolved Question:

Hi, Paul.

My corporation is at the beginning stages of foreclosure, as you may recall. The bank requested the tenants at my strip mall to pay their September rents to the bank, according to the assignment agreement in the mortgage. When they sent the request to the tenants, they gave them copies of many of the mortgage documents. Was this proper? I did not appreciate that they shared this financial information with my tenants, including how much I owe.

One of my tenants (Ms. X), who of course pays rent to my company, sublets studios in her unit to hair stylists and retains these payments for herself. The individual stylists learned that other tenants in the building were sending their rent checks to the bank and decided that they should follow suit. The bank received checks drafted in the name of Ms. X, who has nothing to do with the mortgage. She and I contacted the bank’s attorney and demanded their return. The bank nonetheless deposited the checks. Eventually they returned the money, less the amount of rent owed by Ms. X as her rent to my company. Since then, Ms. X was told by her subletees that the bank has directed the women to again send their rents for October to the bank, but to draft the checks in Ms. X’s name. Without any income, my tenant will be strapped for cash and not be able to pay her rent to my company. She fears that the bank may be doing this for 2 reasons: 1) to force Ms. X to be late in paying her rent & then evict her, thus allowing the bank to rent directly to her subletees and keep all the money; or 2) to force Ms. X to pay her rent to the bank rather then send her rent to my company by collecting all the checks & then crediting her rent account & returning the balance to her, as they did earlier this month. I am sure the law allows them to endorse checks made out to my company, but is it lawful to endorse checks drafted to the name of a third unrelated parry? Is it lawful to collect money from another business in order to force that business to pay you? The bank has not asked the pizza shop to turn over their sales to the bank. Nor have they asked the State of Wisconsin to mail their payments of subsidized child care, which they send to the day care center in my mall each month. Is there a State statute forbidding this usurpation? -Anne
Submitted: 1 year ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your new question, I believe I answered this in your last question.

The bank can try to get the rent payments and you would have to file in court to stop them because they have not yet foreclosed and taken ownership. They cannot take the rent unless your mortgage contract states that they could take the rent in case of default. Thus, you have to file your objection and seek an injunction in court to stop them from taking the rents.

If it is lawful to take the payments for rent even from the sub tenants if it states they can do so in the mortgage contract.




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Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 90310
Experience: All corporate law, including non-profits and charitable fraternal organizations.
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