September 2, 2021 Article

What to do When a Lender Receives a Notice from the Municipality that Mortgaged Property is Going to be Condemned or is in Violation of the Building Code?

Occasionally, a lender will be served a notice from a municipality alerting the lender that a mortgaged property has had unpermitted construction projects, or otherwise violates the municipal building code. The Maine Uniform Building and Energy Code (available here MUBEC Rules and Laws | Office of State Fire Marshal (maine.gov)) is enforced by any Maine municipality with more than 4,000 residents. 

The lender should review the notice carefully as the notice may include requirements to bring the property up to code, deadlines for bringing the property up to code, or a public hearing date on the property. These deadlines are important to the lender to protect its interest in the property.  If the notice is ignored, the municipality may declare a building to be a nuisance or dangerous and seek an order of demolition.

Generally, mortgages include terms that if the borrower destroys, damages, or impairs the property those actions would constitute an event of default. Additionally, the commencement of a forfeiture action by the municipality may constitute an event of default. Under the terms of the mortgage, the lender may have the option to take action to protect the value of the property and its rights in the mortgage.  Those actions may include entering the property to make repairs and paying for repairs.  Lenders should review the particular mortgage for terms before acting.

If the lender will be securing and taking possession of a vacant property and Fannie Mae servicing guidelines apply to the mortgage, the lender should review the Fannie Mae Property Preservation Matrix and Reference Guide which is available here: https://singlefamily.fanniemae.com/media/7321 

Firm Highlights

Publication

How to Protect Payments When Doing Business with Companies in Financial Trouble

Preti Flaherty attorney Bodie Colwell has authored an article for Mainebiz on the expected rise in bankruptcies and how companies can protect their interests when dealing with contracted counterparties or vendors in financial distress. 

Publication

Changing Control in the Time of COVID: Navigating ‘Change of Ownership’ Prior to PPP Loan Satisfaction.

The Hypothetical Everyone loves a hypothetical, right? So let’s begin with one about Billy Builder: Billy Builder holds 55% of the equity in a construction business he founded way back when the fax machine...

Publication

Deadline for PPP Loan Applications Extended to May 31, 2021

On March 30, 2021, President Biden signed H.R. 1799, known as the “PPP Extension Act of 2021,” extending the Paycheck Protection Program (PPP) application deadline by 60 days – from March 31, 2021 to...

Publication

New Eviction Restrictions for Portland, Maine

On November 3, 2020, voters in Portland approved an amendment to the Code of Ordinances which will implement rent control and tenant protections.  The new Sec. 6-236 of the Code of Ordinances extends the...

Publication

Maine’s Exemption Laws Are Changing

In March of this year, Representative Denise Tepler (D. Topsham) introduced “An Act To Increase the Value of Property Exempt from Attachment and Execution,” LD 737, which sought to dramatically change Maine’s exemption scheme. ...

News

U.S. News – Best Lawyers Ranks Preti Flaherty Among 2022 Best Law Firms

Preti Flaherty has been named among the 2022 Best Law Firms by the U.S. News – Best Lawyers rankings. To be eligible for ranking, a law firm must have at least one attorney named...

News

Nineteen Preti Flaherty Attorneys Selected for Inclusion in 2021 Super Lawyers

Nineteen Preti Flaherty attorneys have been selected for recognition by Super Lawyers , including eleven Rising Stars. Super Lawyers rates outstanding lawyers throughout the United States in more than 70 practice areas. Only five...

News

46 Preti Flaherty Attorneys Selected by Peers for Inclusion in Best Lawyers in America 2022, Including 3 “Lawyers of the Year”

Forty-six Preti Flaherty attorneys have been named to Best Lawyers in America 2022, including four “Ones to Watch” and three “Lawyer of the Year” recipients. Inclusion in Best Lawyers in America is considered a...

Publication

What Financial Institutions Need to Know about Maine Trustee Process

Trustee process is a form of pre-judgment remedy to secure a plaintiff’s ability to collect on the eventual judgment, costs, and interest in litigation. (Me. R. Civ. P. 4B(a)). Under Maine law, through trustee...