United States: Resolving Shopping Center Foreclosures In Florida - Considerations For Lenders

Last Updated: October 18 2016
Article by Jay A. Steinman

Shopping centers in Florida—and across the country—are increasingly facing financial stress due to factors such as Internet commerce and rent pressures. Rents generated from a shopping center are usually pledged as collateral. Despite the pledge of rents, defaulting borrowers often feel entitled to use the rental income to pay their lawyers to defend against a lender's foreclosure action. In effect, these borrowers use the lender's own collateral against it to delay and obstruct the foreclosure. It is a priority to cut the borrower off from the income stream to which the lender is likely entitled. This article addresses how lenders can quickly and efficiently resolve these cases while maximizing value and return on collateral.

Review Loan Documents

A thorough review and examination of the loan documents is critical, paying special attention to notice provisions regarding defaults and cure periods. In most cases involving a loan secured by a shopping center, there will be at minimum a note, a mortgage, an assignment of rents and a loan agreement. The assignment of rents can be a standalone document, or the assignment of rents language can be contained within the mortgage.

The lender should decide up front whether it wants to keep some or all of the tenants that occupy the shopping center. As a first mortgage lienholder, the lender can usually foreclose the interests of the tenants on the property and ultimately have them removed. Tenants with leases that predate the recorded mortgage that are not subordinated and those tenants with subordination, non-disturbance and attorney agreement (SNDA) are an important exception. Often, a shopping center property is more valuable as an ongoing operation with paying tenants even if such tenant's rents are subordinated to the lender. However, in some cases there may be reasons for a lender to decide to foreclose and remove existing tenants. Leaser and SNDAs should be carefully reviewed to ensure compliance with and recognition of any obligations owed to tenants by the landlord and other obligations that may be assumed by the lender or its designees. The decision to foreclose tenants should be made early in the process.

Demand Rents From the Borrower

If the loan documents permit, the borrower should immediately be served with a written demand for turnover of all rents collected and to be collected from the shopping center. This written demand is an important condition precedent to several of the claims and motions against the borrower discussed below. The demand on the borrower for a turnover of rents collected from tenants by the borrower should be made pursuant to the terms of the assignment of rents and §697.07, Fla. Stat.

Demand Rents From the Tenants

Rather than trusting the already defaulting borrower to turn over rents after demand, the lender can demand rent directly from tenants. Security agreements and assignments of rent often state that the lender may act in the place of a defaulted borrower and collect rents due directly from the tenants themselves. If the loan documents provide for it, the lender should send written demands that the tenants pay all subsequent rent payments directly to the lender, citing the assignment of rents or security documents. Rents received directly from a tenant by lender should be applied to the debt. A lender can use this valuable self-help tool before any foreclosure is filed in order to gain cash control and bring the borrower quickly to the bargaining table.

Direct rent demands to tenants raise two important issues. First, often tenants faced with conflicting demands for rent from both the lender and the borrower/landlord refuse to pay rent to anyone, though more sophisticated tenants will at least make their future rent payments into an escrow account. Second, the fact that the lender is collecting rent directly from the tenant does not mean that the lender has assumed the landlord's responsibilities. No matter who collects the rent, the borrower remains responsible for its duties as landlord under its leases with the tenants. Any calls or correspondence from a tenant paying rent to the lender for maintenance should be directed to the borrower.

File Suit

Once the initial skirmish over the rents has begun, a foreclosure action should be filed, including a request that the court require immediate turnover of rents. A request to appoint a receiver should be considered at this time. If the lender has elected to foreclose some or all of the tenants, each such tenant should be added as a defendant to the action. Otherwise, tenants should not be named as defendants in the case.

    a.    "Hurry Up" Foreclosure Rule

            i.    Immediate Foreclosure Judgment

Florida provides lenders with highly useful tools in commercial foreclosures to speed up the foreclosure process with the potential to end the case almost as soon as it is filed. Specifically, §702.10, Fla. Stat. provides that a lender in a commercial foreclosure action may file a verified motion for entry of an order to show cause. The first part, §702.10(1), allows the court, without even hearing from the borrower, to set an early hearing at which the borrower must appear and show cause why an immediate judgment of foreclosure should not be entered. The lender can file this request with the complaint. Once the court signs the order setting the hearing, it can be served on the borrower together with the complaint.

The potential for an immediate foreclosure judgment, can be avoided if the borrower files the appropriate pleading. However, the mere fact that an early hearing is set speeds up the foreclosure process in and of itself, because the borrower is unlikely to seek or receive an extension to respond to the complaint prior to the hearing, given the risk that the court will enter a prompt foreclosure judgment at the hearing. Admittedly, some judges are unfamiliar or have little experience with the statute and are reluctant to set "show cause" hearings at such an early stage. They simply need to be educated and convinced that this is the law. The effort is worth it because this can greatly speed up the foreclosure process. However, even if the borrower files the appropriate pleading and avoids an immediate foreclosure judgment, the lender has a second bite at the apple at the hearing—getting mortgage payments during foreclosure.

            ii.    Mortgage Payments

The statute also provides that in the event the borrower avoids the immediate entry of a foreclosure judgment by filing the right pleadings, the court shall review that pleading and determine if the lender is likely to prevail. Since this is usually the case, the court will usually order the borrower to make regular monthly mortgage payments into the court registry or directly to the lender. So, if the borrower tries to delay the foreclosure by raising defenses, the borrower must still pay for that privilege by continuing to make regular mortgage payments until the foreclosure action concludes. If the borrower fails to timely make a regular mortgage payment, the lender is entitled to immediate possession of the property.

In most cases, if the borrower were able to make regular mortgage payments there would never have been a default in the first place. For this reason, borrowers are often unable to make the regular mortgage payments even after the entry of the court order under §702.10(2). It is worth noting that possession of the property is not the same as actual title to the property. The lender may not sell the property after it gains possession but before the entry of a foreclosure judgment. However, the lender does get cash control, but it is then also responsible for maintaining and operating the property. If the lender elects to take possession, there may be some potential pitfalls, so, it is recommended that it hire a professional management company to operate the shopping center, collect rents, have proper insurance in place, and deal with tenants and routine maintenance. The lender can also seek the appointment of a receiver. Often a professional management company can operate the property for less than the borrower was charging. The primary benefit of immediate possession of the property is that it brings order and control (including cash control) to the shopping center's operation. A downside of immediate possession is that it also brings potential liability as the operator of the shopping center during the period of possession.

Rents Under §697.07, Fla. Stat.

When moving for an order to show cause under §702.10, the lender should also move for an expedited hearing to be paid rents from the property under §697.07, Fla. Stat. The Florida rents statute is straightforward and provides that a lender is entitled to be paid rents from the property from the date of the original demand upon the showing that the rents were pledged as collateral, a default occurred, and there was a demand for rents. Significantly, the statute also provides that rents shall be paid to the lender, regardless of any defense the borrower raises. Once the lender makes an initial showing by affidavit or verified motion, the entry of an order directing the borrower to turn over rents is perfunctory.

Note that the borrower's obligation to pay rents under §697.07 is separate and apart from the borrower's obligation to make mortgage payments under §702.10(2). So the borrower can be ordered to simultaneously pay both the rents and the mortgage payments to the lender, out of pocket if necessary. A good analogy is that if one owned a rental property, was using rents to pay the mortgage on it, and the tenant left, the owner would still be obligated to make its mortgage payments to the lender. Many borrowers will argue that they cannot both turn over rents and make the necessary mortgage payments. This has led several courts to enter hybrid orders that direct the borrower to make both mortgage payments under §702.10(2) and pay over all rents under §697.07, but which also direct the lender to apply the rental payments to the mortgage payments due, with the borrower being responsible for making up any monthly shortfall.

Motions for Appointment of a Receiver

By the time negotiations over a longstanding loan default have failed, lenders often view the borrower as irresponsible, duplicitous, or both. The lender's first instinct is to wrest control of the shopping center from the unworthy borrower. For that reason, many lenders' first thought is to seek appointment of a receiver, a court appointed officer charged with taking possession of, operating, and maintaining a business or property. While there are often good reasons to seek appointment of a receiver, this remedy is not available in every situation and carries its own costs and potential problems.

Florida law is clear that the appointment of a receiver is an extraordinary remedy. Even if the loan documents expressly provide that the lender is entitled to the appointment of a receiver upon default, a Florida court will not appoint one until after an evidentiary hearing at which the lender must prove (1) that the value of the property is less than the debt; and (2) the property is suffering "waste" (typically physical deterioration) that adversely affects the value of the collateral; or (3) the borrower is diverting rents from the property.

Typically, a hearing on a motion for appointment of a receiver requires a combination of expert and fact testimony regarding the physical condition of the property, diversion of the rents and the borrower's defaults. A specific receiver should be suggested and presented to the court for examination regarding its experience and skill in operating shopping centers. The borrower also gets to present its own testimony regarding valuation, the financial details of the operation (as it affects value and charges of waste), the physical condition of the property, and any defenses it may have regarding the debt and default. Borrowers often blame lenders for their financial difficulties. Note that most of the information relevant to a receivership hearing is uniquely in the borrower's hands—access to the property for an appraisal, the current financial books and records, the physical condition and efforts to maintain the property. If the relationship between the lender and borrower has remained sour for some time, the lender's information may be dated and extended discovery may be necessary to obtain current facts to support a receivership motion. Consequently, it is imperative that lenders regularly enforce reporting obligations under the loan documents particularly as current market conditions worsen.

When appointing a receiver, courts often follow, but are not bound by, the lender's suggested receiver. The court may chose its own receiver based on its personal judgment and experience. Occasionally, a judge will select a local lawyer or retired judge, who must in turn hire a professional manager to do the operational work, adding another layer of expense.

Once a receiver motion succeeds, the court will sign a receivership order establishing the receiver's powers and authority. The lender has significant leeway when preparing a receivership order for the court's consideration. The receiver's powers can be as broad or narrow as the court will accept after input from the lender and the borrower. Reporting requirements, receiver's fees and costs, amounts which can be expended without court approval, and receiver certificates are all areas to consider when drafting a receivership order for the court's consideration. An important consideration is whether the receiver should have the power to market the property, during the litigation.

While the evidentiary burden is high and cannot be met in every case, there is often good reason to seek appointment of a receiver. A significant advantage of having a receiver is the order, accountability, and control a receiver brings to the property's operation. If a borrower is difficult or assets go missing, a receiver can often quickly obtain relief from the court. Most importantly, the receiver insulates the lender from potential liability during the course of the receivership. However, it must be noted that receiverships can be a significant expense, receivers are typically paid first, and lenders are often asked to pay any shortfall in the cost of a receivership. It is also worth noting that receivers work for the court, not the lender. Therefore, some receivers may feel bound to do things for the good of the estate rather than solely for the lender's benefit.


In the event the retail market continues to deteriorate and shopping center foreclosures become more prevalent, Florida lenders must anticipate the responses of their borrowers. Lenders should be proactive in enforcing the reporting requirements in the loan documents and, if necessary, utilize several tools at their disposal. When used in combination, these tools provide a powerful weapon to help lenders end foreclosure cases as efficiently and effectively as possible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.