Commercial Foreclosures in Pennsylvania: How Deal Formation Impacts Litigation

The fact that commercial transactions can very easily become complex is not a novel statement. When financial institutions lend money to commercial entities, the basic documentation required to evidence the loan, promise to repay, and perfect security interests in any collateral is a measurable amount of paperwork. When the specifics of a deal involve agreements or assets with holding companies, subsidiaries, or partners (on either the Lenders or Buyers end), that only magnifies the complexity of a transaction and the paperwork required to facilitate it.

Unfortunately, sometimes how these deals are structured can create headaches down the road, should the Lender ever need to exercise their remedies. While a Lender may have collection remedies of every kind built into their agreements, the legal operation by which to exercise that option may not be as streamlined as you think. For example, pursuant to Pa. R.C.P. No. 1146, an action in mortgage foreclosure can state multiple grounds for foreclosure but cannot include other causes of action. Therefore, if the payment default includes secured and non-secured loans, Pennsylvania prohibits an action in foreclosure from including a breach of contract claim – even if it all arises from the same event of default. Therefore, the Lender must pursue separate lawsuits on the secured and unsecured debt.

The same is true for pursuing multiple remedies. If a Lender has a mortgage interest in property in addition to the right to confess judgment, the Lender can pursue those remedies; however, they must be prepared and filed separately. To the extent that Defendant intends to dispute those claims, those arguments will be made across several dockets, potentially across several counties. So, to reiterate, although it may factually be as simple as saying that the Buyer and their principals are jointly and severally liable for all debts, the legal operations to obtain various assets through various collection methods may inflate legal costs.

Therefore, if you have a complex commercial real estate transaction that requires litigation, it is likely that the litigation will be just as complex as the deal itself. You must have a skilled team of attorneys who are experienced in complex litigation to give you the best representation.