Banking & Finance Law Report

Archives: Commercial Loans and Leases

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Emergency orders: COVID-19 and distressed commercial leases

Distressed commercial tenants and their landlords may find themselves in tense situations during the COVID-19 pandemic. As those parties consider how to handle their lease obligations, they should consider, among other things, the varying contours of recent executive and emergency orders. As shown below, orders from various jurisdictions have taken different approaches to addressing the … Continue Reading

Commercial Loans: Equity Cure Provisions

Background In loan agreements, lenders customarily require the borrower to make various financial covenants­ whereby the borrower promises to achieve certain financial metrics, often requiring the borrower to stay above or below certain thresholds based on its operations. Since financial covenants are based on past financial performance, breaches of financial covenants typically cannot be cured … Continue Reading

Potential Changes for HVCRE Loans

In this blog, we have described some of the original concerns with the “high volatility commercial real estate” loan regulation as well as some suggestions for change. These rules apply to certain real estate loans for acquisition, development and construction. Recently, there have been suggestions that changes are possible regarding “high volatility commercial real estate” loans … Continue Reading

Location is Not Everything When Perfecting a Security Interest

Most of us are familiar with that old saw “location, location, location”. While location might enhance the value of real estate, including the location as part of the collateral description in the UCC financing statement can limit the protections provided to a secured creditor and may provide a strategy for attack by a bankruptcy trustee.  … Continue Reading

Federal Reserve Expresses Openness to Relaxation of HVCRE Regulations on Community Banks

Last year, as noted by this blog, the FDIC, OCC, and Federal Reserve imposed harsher capital requirements on certain “high volatility commercial real estate,” or HVCRE, exposures, in accordance with the Basel III international banking standards. These new requirements were opposed not only by the real estate industry but also by banking associations, particularly the … Continue Reading

Proposed Limitations On The Use Of Cognovit Notes

The Ohio General Assembly is currently considering a bill that would greatly restrict creditors’ ability to ask debtors to sign cognovit notes. A cognovit note allows a creditor, upon a debtor’s default, to enter judgment against the debtor without the usual notice or hearing. Current Ohio law, specifically Ohio Revised Code Section 2323.13, generally enforces … Continue Reading

Newly Effective HVCRE Loan Rules

Lenders who finance commercial real estate exposures should be aware of new regulations that impose harsher capital requirements on certain “high volatility commercial real estate,” or HVCRE, exposures. In June 2013, the FDIC, OCC, and Federal Reserve jointly approved proposed rules intended to implement new international banking standards, known as the Basel III Capital Accords, … Continue Reading

Seriously Misleading UCC Searches

Determining whether a security interest is properly perfected by using a state’s online lien search may be leading you astray. Perfecting a security interest in collateral establishes the priority of the secured party’s claim to such collateral, providing the perfected secured party with an interest in such collateral superior to the rights held by most … Continue Reading

Ohio Law on Cognovit Judgments and Relief Under Civ R. 60(B)

In K One Limited Partnership v. Salh Khan, et al., 10th Dist. No. 13AP-830, 2014 Ohio 2079, the Tenth District Court of Appeals for Franklin County, Ohio reexamined the limited meritorious defenses available to obtain relief from a cognovit judgment under Civ. R. 60(B) and held that such defenses are restricted “to the integrity and … Continue Reading

Planning For Leasehold Financing

Commercial leases often lack leasehold financing provisions despite the significant impact such provisions can have on the business dealings of the tenant during the term of the lease. Long-term, creditworthy tenants, those who have value in their leaseholds such as restaurants and hotels, are often prime candidates for leasehold financing. A leasehold mortgage is very … Continue Reading

Amendment to Agricultural Lien Law Reinforces Decision in Ohio Dept. of Agriculture v. Central Erie Supply & Elevator Association

A recent change to Ohio’s agricultural lien law clarifies the interplay between security interests governed by Article 9 of the UCC and those governed by Ohio’s agricultural lien statutes, and confirms the ruling of the Sixth Appellate Court of Erie County in Ohio Dept. of Agriculture v. Central Erie Supply & Elevator Association, 2013-Ohio-3061. Central … Continue Reading

Lending Issues to Consider With Respect to The Perishable Agricultural Commodities Act of 1930

Secured lenders extending financial accommodations to borrowers whose collateral includes perishable food items should consider certain specific risks associated with such collateral. Notably, the Perishable Agricultural Commodities Act of 1930 (PACA) creates a statutory trust for the benefit of persons who originally sell the perishable agricultural commodities to such borrowers and are not paid. The … Continue Reading

A Hypothetical in Agricultural Lending — Meet Farmer Bob, AgBank and Massive Grain Elevator

In this hypothetical, we will consider the following circumstances. “Farmer Bob” grows wheat (i.e., crops) “AgBank” has loaned Farmer Bob money secured in part by his wheat “Massive Grain Elevator” wants to purchase Farmer Bob’s wheat Can Massive buy the wheat and not get the shaft from AgBank? It depends. In 1985 Congress passed the … Continue Reading

Hot topics affecting your bank

From time to time we deviate from our normal prose on the banking and finance industry and give you, our reader, insight into other areas of the law that impact your business. A recent post regarding overhauling the Ohio employee-friendly employment discrimination law, Senate Bill 383, tops our list of quality reading material. The post, … Continue Reading

Signs of Trouble Before Payment Default

This article is Part Two in a seven-part series on how to structure sales and what to do when your customer fails to pay. You can find Part One of this series here: Structuring Sales to Ensure Payment. Please subscribe to this blog by entering your email in the box on the left, or check … Continue Reading
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