Commercial property owners in Houston, Texas often believe that once a foreclosure sale has been scheduled, the outcome is inevitable. In many cases, that is not true.
Even after a foreclosure date is set, a borrower may still have options to stop or delay the sale. These options include:
- Reinstating the loan by paying the default
- Negotiating with the lender
- Filing bankruptcy to trigger an automatic stay
- Filing a lawsuit to challenge the disclosure
The following sections explain how commercial property owners commonly stop a scheduled foreclosure under Texas real estate law.
Reinstating the Loan by Paying the Default
Before a foreclosure sale in Houston, a property owner may have the opportunity to correct the default by paying the past-due balance on the loan. The borrower may be able to reinstate the loan by addressing all missed payments, late fees, interest, and other costs associated with the default. Once the loan is reinstated, the foreclosure process generally stops.
For many non-judicial foreclosures in Texas, borrowers may be able to reinstate the loan up until shortly before the scheduled sale. However, commercial loan agreements vary, and some agreements provide a short cure period or limit an owner’s reinstatement rights.
Commercial property owners should carefully review their loan documents to determine whether reinstatement is available. A real estate attorney can help evaluate your options for curing late payments that led to a default.
Negotiating with the Lender
Lenders sometimes prefer to negotiate a resolution on a defaulted loan rather than proceed with foreclosure, especially when the borrower has the ability to address the default.
Lenders may agree to:
- Modify the loan agreement to adjust interest rates, payment terms, or maturity dates
- Forbearance agreements that temporarily suspend or reduce payments
- Restructure the loan balance to make repayment more manageable
In many cases, lenders are less amenable to negotiations as the foreclosure date gets closer. However, lenders often agree to postpone a sale if negotiations are underway.
Filing Bankruptcy to Trigger an Automatic Stay
Filing for bankruptcy can immediately halt a scheduled foreclosure on commercial real estate. This legal protection is known as an automatic stay.
Once a commercial property owner initiates bankruptcy, mortgage lenders generally cannot continue foreclosure proceedings without court approval. This pause can provide valuable time for a borrower to evaluate restructuring options or negotiate with the lender.
Owners may consider:
- Chapter 7 bankruptcy to temporarily delay foreclosure while assets are evaluated.
- Chapter 11 or Chapter 13 bankruptcy to reorganize debt and develop a repayment plan.
Although bankruptcy can stop a foreclosure sale, it is a complex process that should only be undertaken with professional legal guidance. An attorney can help you understand your options and navigate the bankruptcy process.
Filing a Lawsuit to Challenge the Foreclosure
In certain situations, a property owner may be able to seek a court order to stop a scheduled foreclosure. Courts may grant a Temporary Restraining Order (TRO) if the borrower can demonstrate that the lender violated foreclosure rules or failed to follow the requirements outlined in the loan documents.
Courts may be willing to intervene over the following issues:
- Failures to provide proper notice of default or sale
- Errors in the foreclosure timeline
- Violations of contractual cure provisions
A TRO does not end the foreclosure proceedings, but it can delay the sale long enough for the court to review the dispute and to potentially facilitate negotiations to resolve the issue.
Contact an Experienced Houston Real Estate Attorney for Help With Foreclosure Proceedings
If you are a commercial property owner who has received notice of a scheduled foreclosure, you should act immediately to evaluate your options. An experienced Houston real estate attorney from Porter Law Firm can help you understand your rights and identify possible options for stopping the foreclosure before the sale occurs. Contact us today to schedule a confidential consultation to discuss your case.