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We hold the 1st mortgage on a mixed (commercial/residential)

property. Part of the documentation...
We hold the 1st mortgage on a mixed (commercial/residential) property. Part of the documentation requires insurance. The proof of insurance most recently submitted was for the amount of the mortgage remaining, assigned to the residence on the property. If the house burns down, our mortgage amount is covered. If the commercial portion burns down and the house is not, it doesn't appear the remaining 2 buildings are not covered.I also worry about a lawsuit if only general/fire insurance is in effect, and they are sued for someone injured on the commercial portion of the business.What are your thoughts on my questions and what do I need to look at when i review the actual policy?The mortgagees have been excellent in making timely payments and the property is worth 3 or 4 times the value of the remaining mortgage.
Looking for advice.
Thank you,Tom
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Answered in 4 minutes by:
3/14/2018
DamienJD
DamienJD, Attorney
Category: Business Law
Satisfied Customers: 5,405
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Hello: My name is ***** ***** I am an attorney. Please give me a moment to review your question. I may ask some questions to clarify issues.

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Customer reply replied 5 months ago
ok
Customer reply replied 5 months ago
do not want to talk on the phone $$

That's fine. Hold, please, responding...

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There could be a concern if the commercial properties are not covered as you are indicating because it may lead to less incentive to make the mortgage payment. Regarding a personal injury claim, the concern would not necessarily be that a judgment lien can be attached to the properties since the mortgage would have priority, but if the damages put the current owner out of business, it could be a concern that they won't make the mortgage payments. So, it comes done to whether the current owner will have the ability and willingness to make mortgage payments if there is a fire or damages due to a personal injury case.

We can discuss this more if you want to do so.

If you have further questions or you need further assistance, just let me know.

If not, please remember to rate my answer between 3 to 5 stars without any additional costs to you. That is how I get credit for answering your question. Best regards.

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Customer reply replied 5 months ago
just so I am clear. Being that we are holding the 1st mortgage, should there be an injury and a following law suit, our investment is still covered? Even if someone sues (and wins )an amount larger that the existing mortgage ?
More to come in a second or two
Customer reply replied 5 months ago
I do understand that if something happens that due to a fire they can no longer make payments, it would be a problem. Is there anything preventing us from foreclosing?
Customer reply replied 5 months ago
Our mortgage clearly says that if payments are not made, we can foreclose after 30 days notice.

Hold, please. Let me read and respond...

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Customer reply replied 5 months ago
How does the lawsuit work regarding our investment? Lets say a serious injury results in a settlement that they can't cover... how would it impact our 1st mortgage?

If there is a judgment lien on the properties because of a personal injury claim, the mortgage would be senior to it. You would still be able to foreclose on the property. So, if you are not paid for any reason, you can foreclose. You would get paid the balance, and whatever is left over would go to any other claim next.

If you have further questions or you need further assistance, just let me know.

If not, please remember to rate my answer between 3 to 5 stars without any additional costs to you. That is how I get credit for answering your question. Best regards.

DamienJD
DamienJD, Attorney
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Customer reply replied 5 months ago
I think you've answered my questions nicely.
Thank you, ***** ***** giving an excellent rating.

You are welcome!

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