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socrateaser
socrateaser, Lawyer
Category: Legal
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Experience:  Retired (mostly)
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Without a signed SNDA, can a subsequent lender foreclose on

Customer Question

Without a signed SNDA, can a subsequent lender foreclose on a lease and terminate the pre-existing lease of a commercial tenant under Indiana law?
Submitted: 4 years ago.
Category: Legal
Expert:  socrateaser replied 4 years ago.

Hello,

Hang on, please. I just received your question, and I need a few minutes to research Indiana case law....

 

Answer:

 

Under current Indiana case law (Myers v. Leedy, 915 NE 2d 133 (2009)), the weight of authority subscribes to the view that "a lease is terminated by the foreclosure of a prior mortgage if, and only if, the tenants are made parties to the foreclosure proceedings []." 52 C.J.S., Landlord & Tenant § 154 (2003). See also 55 Am.Jur.2d Mortgages (1996). "In general, if a mortgage is duly foreclosed and the time for redemption has passed, all of the mortgagor's interest in the lands has been cut off and, consequently, any leasehold interest the mortgagor attempts to convey will be barred. Ordinarily, however, the foreclosure of a mortgage affects the rights and interests of only such persons as are made parties; and one in possession of real estate under claim of right from a mortgagor is a necessary party to a foreclosure of the mortgage, and a decree of foreclosure is not effective as to him or her unless he or she is joined." Id. at § 653.

 

In plain English, an SNDA would have no bearing on the outcome of the action, unless the tenants were joined as part of the foreclosure action. If the tenants were joined, then the court could order the lease terminated. Otherwise, the lease remains in force, and the tenant is entitled to continue without attornment.

 

Hope this helps.

Customer: replied 4 years ago.

your answer refers to a prior mortgage; my question asked about a mortgage subsequent to the lease

Customer: replied 4 years ago.

your answer refers to a prior mortgage; my question is regarding a subsequent lender, not a prior lender

Expert:  socrateaser replied 4 years ago.

Hello again,

I'm confused by your comment. Does the subsequent lender intend to foreclose again?