Tennessee Foreclosure Deficiency Statute; Is 86% the New Magic Number for Calculating Foreclosure Bids?


In response to the thousands of foreclosures of commercial and residential real estate that have taken place across Tennessee over the last few years, the legislature overhauled the Tennessee Deficiency Statute, which governs a lender’s collection of the balance owed by a borrower after foreclosure occurs.  The Tennessee deficiency law, which is codified at Tenn. Code Ann. Section 35-5-118, provides generally as follows: Subsection (a) confirms that Lenders are entitled to deficiency judgments in Tennessee. Sub-section (b) defines a deficiency judgment as “the total amount of indebtedness prior to the sale plus the costs of the foreclosure and sale, less the fair market value of the property at the time of the sale” and codifies the principle that a sale at public auction creates a rebuttable presumption that the sale price of the property is equal to the fair market value of the property at the time of sale. Subsection […]

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Should Lenders Notify Insurance Providers Regarding Foreclosure Proceedings Against Residential or Commercial Real Estate?


The Tennessee Court of Appeals recently decided an important case addressing whether lenders are required to notify property insurers regarding commencement of non-judicial foreclosure proceedings against residential or commercial real estate.  U.S. Bank, N.A. v. Tenn. Farmers Mut. Ins. Co., No. W2012-00053-COA-R3-CV (Tenn. Ct. App.  Nov. 29, 2012). In the US Bank case, the owner of the residence failed to make timely mortgage payments, and the bank commenced foreclosure proceedings.  Soon thereafter, the owner filed for bankruptcy, which stayed the foreclosure proceedings.  After the foreclosure proceedings were stayed, the residence was destroyed in a fire, apparently as a result of methamphetamine production in the home.  After the fire, the bank made a claim to recover insurance proceeds, and the insurance company refused to pay the claim.  The insurance company’s refusal to pay the claim was based on the bank’s failure to notify the insurance company regarding commencement of foreclosure.  The […]

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“Force Majeure” – What Happens When the Worst Happens?


  When Hurricane Sandy hit the East Coast recently, the resulting power outages, gasoline shortages, flooding, wind damage, and other devastation made it difficult or impossible for businesses in the hurricane’s path to function normally.  In fact, one of my clients was featured for its efforts to keep its data center in lower Manhattan running despite loss of power.  When the client called me to discuss contingency plans under its lease, the first provision I looked at was “Force Majeure”. Force majeure can come into play in a transactional instance, where it is a fairly standard provision of many contracts, like in my client’s lease, or in a litigation instance, where it can be an affirmative defense to a breach of contract claim. Under Tennessee law, the affirmative defense of force majeure is known as “an Act of God” and “any misadventure or casualty is said to be caused by the […]

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Back to Basics: A Rundown of Tennessee’s Eviction Process


Recently, I’ve had a flood of questions from clients asking how to evict problem tenants. This post describes how to evict a tenant or other occupant of commercial real estate. The first step in dealing with an eviction is determining whether there is an agreement in place that governs occupancy of the property.  Typically, the lease or other agreement between the parties will outline any notice that may be required and other conditions precedent that must be satisfied prior to exercising remedies. Fortunately, in addition to the applicable provisions of a lease, if any, the Tennessee Legislature has provided us with a statutory scheme “to provide a streamlined summary procedure to determine the rights to possession of land.” 94th Aero Squadron of Memphis, Inc. v. Memphis-Shelby County Airport Auth., 169 S.W.3d 627, 637 (Tenn. Ct. App. 2004); see Tenn. Code. Ann. §§ 29-18-101 through 29-18-.134.  To begin eviction proceedings, one […]

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Lien Priority – How to Make Sure You Are Watching Out For Number 1


  The Tennessee Court of Appeals recently decided a classic case involving lien priority and whether an individual or entity not holding title can create a valid security interest in real property.  Anchor Pipe Co., Inc. v. Sweeney-Bronze Dev., LLC, No. M2011-02248-COA-R3-CV (Tenn. Ct. App. Aug. 2, 2012). The issues involved in the case arose during the development of a residential subdivision located in Gallatin, Tennessee.  In February 2007, the owner engaged Anchor Pipe Company (“Anchor”) to promptly commence work on the property.  As of May 2007, record fee simple title to the property was held by Sweeney-Bronze Development, LLC (“SBD”).  On July 24, 2007, the construction lender recorded a Deed of Trust from Sweeney-Bronze Holdings (“SB Holdings”), not SBD.  On June 27, 2008, Anchor was told that it was not going to get paid for any more work on the property.  During July 2008. Anchor recorded two materialmen’s liens against the property.  On November 12, 2008, a deed […]

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