Acting as a lender for commercial property and insurance?

[Marlene_35]

FLORIDA

I am a lender for a commercial property (6-plex).
My name is NOT on the insurance policy but the borrowers' name is.
Can I be liable for anything that could happens to the property or tenants who live in there?

Thank you for your input.
Marlene

 

[LdiJ]

FLORIDA

I am a lender for a commercial property (6-plex).
My name is NOT on the insurance policy but the borrowers' name is.
Can I be liable for anything that could happens to the property or tenants who live in there?

Thank you for your input.
Marlene

Yes, you can. You should also have insurance on the property. Both casualty and liability.

 

[HRZ]

A lender who is not named on the insurance is at risk of not getting paid if the building is wiped out and borrower walks away ...absent other collateral .

I lend to one commercial buyer ..rest assured I am named on the insurance ...among other things.

Is your note recorded and are you in first position ?

 

[Marlene_35]

Thank you.
To HRZ:
I have issued 3 notes and only one note has been recorded. There is no other lender for that property besides me. Do you advise to record the other promissory notes as well?

 

[HRZ]

if the other notes are not recorded then thier place in time sequence is likely not protected ...get them recorded.

I'd be keen to get added as a named insured on the policy...won't cost extra but may require some jawbone efforts now ...btw, then you get notices if coverage lapses

 

[FlyingRon]

Your agreement with them should (like a REAL mortgage) require them to carry insurance to your benefit or allow you to place insurance for them and bill them for the premium.

 

[adjusterjack]

My name is NOT on the insurance policy but the borrowers' name is.

If your notes didn't include the requirement that you be named as Loss Payee and Additional Insured, then there is no way to compel the borrower to do it now.

If your name is still on the deed, you are at great risk. You'll need your own insurance for the building and liability and you won't be able to charge the borrower for it.

 

[Marlene_35]

Thank you all for your help.
The first note was recorded as a mortgage, the other promissory notes were not recorded. The mortgage says that the borrower must provide insurance at all times. However the builder (it was a new construction finished in 2018) is refusing to purchase the required policy arguing that is not necessary since he has it's own insurance (contractor's) property and liability coverage, but my name is not listed as Loss Payee or Additional Insured. Also my name is not on the deed. I'm not sure what other options I may have.

 

[justalayman]

You’re confusing liability matters owed to third parties and the liability the debtor owed to you. Unless your name appears as a current owner in title (or their is some reason a claimant can bring you into a suit as a prior owner), you have no liability to third parties through your position as creditor to the current owner.

What many posters are addressing is protecting the current owners liability to you (the value of the mortgage loan or promissory notes). That is where the clause mandating insurance naming you as loss payee comes into play. If the buyer does not have insurance as your contract demands, if the contract allows for forced placed insurance, then you purchase the necessary coverage and bill the mortgagor.

If your contract demands insurance and you do not have the right to force place insurance, your option is to sue for breach of contract seeking either specific performance or voiding the contract with you foreclosing on the property.

 

[adjusterjack]

Thank you all for your help.
The first note was recorded as a mortgage, the other promissory notes were not recorded. The mortgage says that the borrower must provide insurance at all times. However the builder (it was a new construction finished in 2018) is refusing to purchase the required policy arguing that is not necessary since he has it's own insurance (contractor's) property and liability coverage, but my name is not listed as Loss Payee or Additional Insured. Also my name is not on the deed. I'm not sure what other options I may have.

"Providing" insurance and putting you on the policy are two different things. If you wanted to be Loss Payee and/or Additional Insured you should have specified that in the loan contract.

Who is it that you've loaned all this money to? The builder or a buyer who is having it built?

 

[LdiJ]

You need to make sure that you are covered in the case of the building being damaged or destroyed since its collateral for the mortgage. If you cannot be added to someone's existing policy. You need a policy of your own, even if you cannot force the buyer to pay for it.

 

[HRZ]

IF the mortgage note requires insurance with you as a named party ..then play hardball...either the borrower brings it into compliance by next week ..written demand to do so...OR you exercise the default provisions in the mortgage or as provided by law and don't blink. You are flying blind and naked to rely upon builders coverage!

I know some folks who have recovered some very nice property when borrower defaulted on insurance terms and could not pay off the note....what's in your mortgage language may differ.

Hire an attorney to help you play hardball as appropriate

 

[Marlene_35]

To: adjusterjack
I've loaned the money to the builder.

To: LdiJ
I've tried to get a policy of my own but the insurance agent told me that they can only sell me one when my name is on the deed. It is not. However one of the mortgage that was signed by the builder states clearly this: "All insurance policies and renewals thereof shall be in a form acceptable to Lender and shall include a standard mortgage clause in favor of and in form acceptable to Lender."

To: HRZ
I agree with you and I've already informed the builder that he has one more week to comply. And by the way I also talked to an attorney yet.
---------------
Thank you ALL for your great input and willingness to help.

 

[adjusterjack]

I've tried to get a policy of my own but the insurance agent told me that they can only sell me one when my name is on the deed.

Not true. You don't have to own property to have an "insurable interest." You appear to have an "insurable interest" by virtue of your loan contract. Talk to other agents.

I've already informed the builder that he has one more week to comply

Do your loan contracts specify that you are to be named as Loss Payee and Additional Insured?

You haven't said.

If they don't, then he has complied with the insurance requirement, it just doesn't do anything for you.