Can the lender of a collateralised loan take more than the collateral upon default? Recently, Park Hotels &amp; Resorts has pulled out of the San Francisco market, but - assuming I've understood correctly - instead of selling their properties there for pennies and taking the loss on the mortgages(?) on them, they have chosen to default on the debt and leave it to the lender. “This past week we made the very difficult, but necessary decision to stop debt service payments on our San Francisco CMBS loan,” June 05, 2023 (GLOBE NEWSWIRE) -- Park Hotels &amp; Resorts Inc. (“Park” or the “Company”) (NYSE:PK) today announced that, starting in June, it ceased making payments toward the $725 million non-recourse CMBS loan which is scheduled to mature in November 2023, and is secured by two of its San Francisco hotels—the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco. The Company intends to work in good faith with the loan’s servicers to determine the most effective path forward, which is expected to result in ultimate removal of these hotels from its portfolio. -- Globe Newswire - https://archive.ph/M4yl6 In a discussion on social media which I won't source for reasons of good taste, I read the following: I'm pretty sure the bank could go after the owner for any difference between the unpaid loan balance and what they're able to sell it for. The question is, would something like this force them to write down on their GAAP financials the value of any other loans they've extended. Meaning maybe they won't. I don't know what the second and third sentences mean, but the first one gave me the title question - in the case where a loan is taken out like a mortgage, whereby the collateral is the property, and there are big red letters on the offer contract stating &quot;your home may be repossessed if you fail to make payments&quot;, can the lender upon selling the repossessed property at a loss still hold that debt against you and get the money off you somehow? My initial thoughts are &quot;no, they can't, the reason for the loan being collateralised was specifically to cover delinquency, it's their dang fault for making a bad bet on the market,&quot; but that's directly contravened by the above social media post. Upon reading this answer, it appears the terms I'm looking for are &quot;recourse&quot; and &quot;non-recourse&quot;, but I'm still unclear: The default rule is that security interests in assets other than real property is a recourse debt [...] In the case of secured debts in real property, most states mirror the personal property rule (which is very close to Uniform since every state, territory and district in the U.S. had adopted Article 9 of the Uniform Commercial Code governing security interests in property other than real estate). But in a few states (including California), security interests in owner occupied residential real estate (a.k.a. mortgages, liens, encumbrances, or deeds of trust) are truly, or in practice are, effectively non-recourse. Which I may be misreading, but it sounds like California (of interest here) would be expected to be a special case for some reason. EDIT: I read the social media thread further and found the following from the same poster: I was wrong. Virtually all big commercial loans of the scale we're talking here are &quot;nonrecourse,&quot; meaning the lender takes the building but has no further right of action action against the borrower. This is unlike home mortgages, or even most small business loans. From this it sounds like the poster is mistaken, as home mortgages are also non-recourse according to the above linked LSE post... But maybe I'm getting confused with jurisdictions and it's different because Park are headquartered in Washington DC... This exact situation involves a large corporation headquartered in Washington DC, a lender headquartered in Florida, property in California, and the question is being asked by some dingus in England with nothing more than a passing interest in America and no line of credit larger than a small house in the countryside, so answers relating to all jurisdictions would be fascinating, especially those of England.
I'm pretty sure the bank could go after the owner for any difference between the unpaid loan balance and what they're able to sell it for. Incorrect. The news report states &quot;it ceased making payments toward the $725 million non-recourse CMBS loan&quot;. The term &quot;non-recourse&quot; means that the bank can't go after the owner and is limited to recovering its debt from the collateral. The term &quot;recourse&quot; means that the bank can go after the owner in a lawsuit for amounts still owed after the collateral is applied to the debt. The question is, would something like this force them to write down on their GAAP financials the value of any other loans they've extended. The bank extended the loan, so if the real property is worth less than the amount of the debt, the bank has to write off the balance of the debt on this secured loan. If the bank writes off the loan, it gets a tax deduction in the amount of the write off, however. The written off debt is also taxable income to Park Hotels &amp; Resorts Inc. to the extent that the company as a whole is not insolvent. In California, the &quot;default rule&quot; is that the owner occupied residential mortgages are non-recourse loans, but that loans secured by personal property and other mortgages are recourse loans. Unlike California and about four other states, owner occupied residential mortgages in other U.S. states are also recourse by default. A non-recourse loan on a mortgage of a hotel is not the default rule (even in California) and is contrary to usual commercial practice. Park Hotels &amp; Resorts Inc., in this case, obtained an extraordinarily favorable deal with CMBS (normally it would be a recourse loan with personal guarantees from all related companies and from multiple top executives and investors of the borrower), perhaps in exchange for a higher interest rate than it might otherwise have secured. answers relating to all jurisdictions would be fascinating, especially those of England. The way that real estate in financed in England is so profoundly different from U.S. practice that it isn't really possible to even analogize to this situation in California. For reasons related to tax laws, the structure of English mortgage laws, English insolvency laws, and the way that customary commercial real estate financial deals have evolved over time in England, the kind of deal that was struck between Park Hotels &amp; Resorts Inc. and CMBS in this case would have been structured completely differently if it had been done in England. It might be legal to do the same deal in England, but that isn't what firms trying to achieve the same objectives would actually have done. I know only enough about how real estate finance in handled in England in deals like this to know that it is completely different from how it is handled in the U.S. I am not familiar enough with real estate finance practices there to know how it would actually be done there.
I got and answer from lawyer in Netherlands. To rent out to the company is not without risks. You rent out to the company and the company rents out to the actual user of the apartment. That is subletting. The sub-lessee is protected by law. So when the company fails to pay, you can end the contract with the company (you have to go to court for this), but then you will become the lessor to the actual user (=sub-lessee) then. If you feel that that is against your interests, you have to start a court procedure within half a year to end the contract with the actual user. Also note: it is forbidden to rent out to people that don't have a legal status. So you make sure you trust the company very well if you are going to rent out to them. I recommend to seek help from a real estate agent that is well known and member of NVM or other trustworthy organisation.
What credit agreement? A credit agreement involves someone advancing you money which you agree to pay back with interest - there is nothing like this here. You entered a contract for the course the terms of which were that, at your election, you could either pay upfront or pay by monthly instalments. That's not a credit agreement, it's a straightforward contract for services with alternative payment terms. One of the other terms was that if you withdrew then the full amount would be immediately payable. Under normal contract law principles, this is all fine. Consumer Law Under UK consumer law, you have a right to cancel a contract for services formed off-premises if you do so within 14 days. "... around 1 week and then around another week ..." might be within 14 days; if it is, you are entitled to a full refund; if it isn't, you owe the money. There are also rules about what information they needed to give you. If they haven't then they have committed an offence and the contract may also be void.
My friend should have taken his property with him, but presumably the host can't just keep it, especially after reaching out to them? Correct. However, the host does not have to do anything to facilitate its return i.e. they don’t have to post it to you. So long as they keep it for your friend to collect and don’t appropriate it for their own use, they are not breaking the law. If they do appropriate it, that is called theft or its tort equivalent, conversion. As my contract was with Airbnb and the host works from them, is there any responsibility on their part, e.g. Could I hypothetically open a small claims case against them? Or would any small claims case be directly against the host themselves? This is not true. You and the host each have a contract with Airbnb for the use of the platform. The contract for the accommodation is between you two and doesn’t involve Airbnb at all. In any event, there is no contractural issue here.
I don't know precisely what the default rate is, but I represented a bail bondsman for several years so I do have a good sense of the economics of that business. Basically, bail bond business make very little profit after their expenses (rent, payroll, licensing, cost of use of money put up as bonds, etc.) on the non-refundable fees that they charge for the bonds themselves (typically about 10% of the bond amount although prices vary on a case by case basis). Additional fees are charged for security measures taken by the bail bond company to insure the client's attendance such as ankle bracelets or fees paid to bounty hunters to recover the client if he absconds. The profits come almost entirely from seizing collateral (often motor vehicles, firearms and homes) that someone paying for a bond pledges in the event that the bail bond is forfeited, for example, because the criminal defend absconds rather than appearing at a hearing or trial, in addition to the non-refundable fee charged to provide the bond in the first place. (It is a bit like movie theaters which break even on their movie ticket revenues and make their profits by selling food and drinks.) A typical bail bond business owner will sell the motor vehicles and firearms pledged as collateral to pawn brokers and independent used car sales lots, and will keep the (typically very bottom of the market) real estate and rent it to low income tenants. In other words, most bail bond company owners eventually build wealth by becoming slum lords with real estate pledges as collateral for bonds that go bad. Another revenue stream for a bail bond business is bounty hunter work, partially for their own absconded clients which can result in a partial or full restoration of the funds provided by the bail bond company that often does not result in a refund to the client whose collateral was seized as a result of the default, and sometimes for other wanted felons upon whom law enforcement has placed a bounty because they are not set up to recover the subject of some of their outstanding warrants in an economically viable way. Usually, bounty hunting one's own absconding clients is more profitable than chasing reward money from law enforcement agencies for other people subject to arrest warrants. Default rates are ultimately a function of how selective a bail bond company is about the clients for whom it posts bonds and about how closely the company supervises the client who is out on bond to make sure that he (or she) complies with his (or her) pre-trial release order terms. But, even if the client absconds and the bail posted by the bail bond company is forfeited and can't be recovered within any applicable grace period, the bail bond company can still avoid losses by having collateral securing the risk of a forfeiture of the bond that is worth significantly more that the amount of the bond posted by the bail bond company. As a typical bail bond company website (which sounds more clear than it is when you really try to pin down what they are saying and for what it is worth is not my former client's website) explains: Most of the time bail collateral takes the form of property. If the court is collecting on a property-based bail collateral because of a failure to appear in court, it typically involves the seizure and sale of the individual’s home. Property bail takes weeks to collect on, and equity in the estate being sold must be determined to equal at least 150% of what is owed the court. Collateral will be returned when the case is completed, whether the the person is found innocent, the charges are dropped, the person is sentenced or bail is exonerated. If the individual for whom the bail collateral was offered fails to appear in court at the agreed upon time and date, the collateral will be seized or collected by the court or the bail bond company. The full amount of the collateral may not be returned to the individual if a premium has been put in place when using a bail bond agent. This premium is negotiated between the bail agent and the arrested party or person bailing the arrested person out. Bail collateral will typically be returned within five business days after the individual has paid off all financial obligations and their case has been concluded. Until this happens a bail bond agent can hold the bail collateral. A financial website explains the situation this way: When a defendant uses a bail bond agent to post bail, the defendant must pay the bondsman’s fee, and may also have to hand over collateral or sign a security agreement. Should the defendant comply with bond conditions, the bond agent will return the collateral or release the lien created by the security agreement upon the conclusion of the case. However, the bond agent’s fee (the 10% to 15% of the total bail amount) is not returned no matter the outcome. Bond Forfeiture and Bounty Hunters Should a defendant who used a bond agent’s services fail to appear in court or otherwise violate bail terms, the agent can usually try to find the defendant, take that person into custody, and physically take the defendant back to police custody. Courts typically grant bond agents a grace period after a defendant violates bail terms. If the agent can return the defendant to court within that grace period, the court usually will not require the agent to pay the full bail amount. As part of this process the bail bond agent can employ bounty hunters, also called bail enforcement agents, to track down and apprehend the defendant. Bounty hunters, like bail bond agents, are not government employees or law enforcement officers. They do not have general arrest powers, but can arrest a defendant who used the bail bond agent’s services. This is because as part of the contract defendants sign with the bail bond agent, defendants typically agree to allow the bond agent, or bounty hunters working for the agent, to enter their home, arrest them, or take other actions that would typically be illegal without the defendant’s consent. Note that state laws on both bail agents and bounty hunters can differ significantly, and not all states allow for bail bond agents or bounty hunters. For example, suppose that son is arrested for a felony and released prior to trial on a $20,000 bond for which his parents pay a non-refundable $2,000 non-refundable premium and sign off on a $20,000 second mortgage on their house with a $200,000 fair market value which is also subject to a $160,000 first mortgage. If son defaults in a way that triggers his parents' obligation to pay the $20,000 placed at risk by that default, and the parents don't have the money, the bail bondsman takes the house subject only to the $160,000 first subprime mortgage and nets $40,000 of equity (the $20,000 surplus would rarely be enough to cause another buyer to bid at the foreclosure sale). The bail bondsman then refinances the $160,000 first mortgage at the much lower interest rate he qualifies for with his higher net worth and better credit rating, and then rents it (often initially back to the parents who pledge the house as collateral in the first place) at a market rate, which, for a house like that is probably on the order of $2,000 a month, until he decides to resell it (perhaps assembling many similar houses on the same block over time and then selling the entire block to a developer who wants to scrape the houses to build an apartment building on the entire block instead, at a significant premium). Even if I a mistaken and the collateral can only be seized when the bond is actually forfeited and not merely when it is placed in peril by a failure to appear when the grace period has not yet run, or if the actual amount of the bail bond debt is repaid after the collateral has been foreclosed upon and sold to a third party, insuring that there is sufficient collateral to back the full amount of the bond if it has to be repaid to the bail bondsman, this still prevents the bail bondsman from losing any money in the worst case scenario if the bond is forfeited. Indeed, this will usually make the bail bondsman a healthy profit because the value of the collateral is generally significantly in excess of the value of the bond, at the cited bail bond company at least 150% of the amount potentially owed (also providing a cushion if the fair market value of the collateral has been overestimated), but not so high relative to the value of the bond that another bidder will bid at a foreclosure sale. So the bail bondsman will sometimes make a profit on the collateral seizure and sale to a third-party, even if the bond debt ($20,000 in this example) is ultimately repaid to the sponsors of the client because the client is returns to court custody before the grace period expires. Sometimes a bail bondsman will also take a guarantee of repayment of the bond amount if there is a default, in place of some or all of the collateral if the guarantors' incomes are sufficient to comfortably be able to pay the full bond amount, at least in installments over time, even if the guarantor has few assets of value to pledge, but this is much more common for small bonds of, for example, $500 or $1,000 or $2,000 than it is for a medium bond amount for a felony of about $10,000 or a higher amount of $25,000 or $100,000 for serious felonies when the court is worried that the client is a flight risk, where the bail bondsman will typically post bond only of the client's supporters can offer sufficient collateral to cover the full amount. This is very similar to the reason that a hard money lender doesn't worry too much about the ability of the people borrowing from the hard money lender to pay during the typically short loan term because any unpaid loan balance can be recovered by seizing collateral for the hard money loan which is worth significantly more than the value of the loan. The New Yorker interviewed a bail bondsman who claimed that less than 1% of his clients defaulted, in 2013, but in my experience this is highly implausible and unusual (as the story notes, even prime secured mortgage loans have a higher default rate than that most of the time), even though it certainly isn't impossible if one is very selective about who one takes on as a client. The more likely possibility is that the bail bondsman is actually talking about clients who abscond or violate bond conditions who are not returned to the court within the grace period, or about the percentage of transactions in which the bail bondsman actually loses money after foreclosing on collateral and collecting from guarantors, if necessary. A New York Times in a 2018 article does not provide a forfeiture rate figure, but does explain that as long as the client is returned to law enforcement authorities within a grace period that can vary from a few months to two years on a state by state basis, the forfeited bond will usually be returned to the bail bond company. One company cited in the 2018 New York Times article with $800 million of revenues had zero losses as a result, a data point that I strongly suspect reflects not a zero bond forfeiture rate but a complete recovery of forfeited bonds from bond collateral and guarantors, with profits on some bond collateral seizures exceeding, on average, losses from bonds extended with insufficient collateral or with guarantors who can't make good on their obligations or go bankrupt. According to this 2018 New York Times article, California is one of the only states that requires a premium refund when a client is re-incarcerated voluntarily during the grace period. This policy white paper from the Obama Administration notes that: Though failure-to-appear rates declined from 25 to 17 percent between 1992 and 2009, pretrial re-arrest rates actually increased from 14 to 16 percent for released felony defendants in large counties. This 15-17% failure to appear rate is a much more accurate estimate of bond defaults prior to before considering grace periods. A law review article from 1994 explores the economics that drive the bail bond industry in more detail than is possible in a Law.SE answer.
The mortgage is not relevant in the way you think it is What matters is who owns the property. The owner(s) of the property must agree with the tenant (or, more likely here, boarder) on the terms. The owner(s) need to agree between themselves how to split the income although for tax purposes it would generally be assessed in proportion to the owner’s shares. Note that the mortgage may not allow tenants or boarders or may require the permission of the mortgage.
Let's analyse the landlord's claims: You have an assured shorthold tenancy agreement. The fact that there isn't a written contract doesn't change this as a verbal agreement is legally binding. That's true. A tenancy exists even if this was never written down, and it's an AST by default if the requirements for being one are met. Payment of rent constitutes acceptance of these terms. Payment of rent by the tenant, and its acceptance by the landlord, is sufficient for a tenancy to be regarded as existing. The tenancy can only be terminated early from the permission of the landlord. That's rubbish. A tenant can always end a tenancy, but there may be restrictions. In particular, a tenant cannot end a tenancy before the end of a fixed term without the agreement of the landlord, but the landlord has an obligation to find new tenants if this happens. However, I've been unable to find any information as to whether a fixed term exists if there's no written agreement. Assuming there is no fixed term, then for a month-to-month tenancy, the tenant must provide one month's notice to end the tenancy, with that month ending at the end of a rental period (i.e. the day before the next payment would be due). If you leave early this is legally abandonment and you are still responsible for paying rent for the duration of the tenancy That's true. ... if you do leave next month I'll consider you in rent arrears and pursue payment through legal means That is possible - but if you give notice as described above, then the tenancy will end, and (assuming you're up to date with the rent) you'll no longer be liable.
The Facebook forum doesn't prevent a contract from being formed. But, for a contract to be formed there must be an affirmative agreement, not silence (at least in cases that aren't between merchants). If they later decide to work together without reaching an agreement on the details, the draft contact could be considered, but the Facebook forum for its delivery and that fact that it wasn't expressly assented to might reduce its weight as part of the evidence in an attempt to determine what the terms of their oral or implied agreement to work together involved. It would be very unusual for a broker not to get a signed agreement in writing to pay his fees, although an oral or unsigned agreement to pay a broker is not necessarily barred by a statute of frauds. A finder of fact would be quite skeptical of a broker's claim to have an agreement in those circumstances and often the professional regulatory provisions related to brokerages would require that fee agreement must be signed and in writing even if contract law does not require that this be done.