Can a Bank Auction Commercial Property Due to Business Loan Default?
If you default on your business loan it can wipe out years of hard work. Yes Bank can Auction your Commercial Property if Recovery Notice or Auction Warning has been issued by Bank. But Bank can Auction your Commercial Property only if few conditions are met. First your Commercial Property must have been Mortgaged with Bank or given as collateral/ security against Business Loan. Secondly bank should have followed due process of law for recovery. It mainly depends upon what is mentioned in your Loan Documents, What type of security you have given against loan, What recovery notices have you received & at what stage your loan is at presently. Read Also:- Can bank Auction your Residential Property?
For Commercial Properties, non-payment of EMIs is not the only reason. Since you have invested in a Shop, Office, Factory or Warehouse and are probably using it for your day-to-day business. Auction of Commercial Property can result in loss of job to many individuals and will affect family, customer and businesses around you.
Don't worry if you require assistance from Loan Settlement Advocate we can help you with that too. Adv. BK Singh can guide you about your standing in the matter and what all you can do. How can you work towards settling your account with Bank.
The decision about your next course of action needs to be taken by you. No Advocate will guarantee you that your property will not be auctioned or Bank will settle with you. But proper guidance will at least help you take an informed decision rather than panicked ones.
Why Does Commercial Property Auction Matter for Businesses in India?
If you run your own business there are high chances that you must have bought some commercial properties. You might have even started depending on them for your families livelihood over years. It could be any one of these. Factory at Noida Shop at Ghaziabad Office at Gurgaon Warehouse at Mumbai.
What happens if you suddenly stop paying because your business isn’t generating profit. You can be in default for just couple of months and bank can start recovering money from you. You will get tons of notices. But what do all those notices mean?
Its always a good idea to speak to a Loan Settlement Lawyer at some point of time. The remedy when you visit him after being served a notice will be different if you contact him after your property is served with notice of possession/auction.
Loans like these are very common in Delhi NCR and most metro cities. There are different acts which can be applied depending on the scenario. Know from where you have taken the loan and what type of security did you provide them.
Quick Facts
- If a mortgage property is auctioned by the Bank to recover the loan then that property comes under this category.
- Just because you have defaulted on a loan on business does not mean that all of your properties will be put under auction.
- Provided all conditions are met, under SARFAESI act 2002.
- If the loan is unsecured i.e. not against any property, you have no rights to auction the borrower's property.
- If you have asked for a settlement will not prevent bank from proceeding with recovery/auction of the property.
- Including guarantors or if anyone has given their property as part of security then they too can be included under this category for their properties to be auctioned.
- You can contact Advocate BK Singh for consultations about settlement and any other alternatives available to you once he reviews the documents.
Can a Bank Auction Commercial Property for Business Loan Default?
Yes they still can. If you have taken out a mortgage over your commercial property when you obtained a business loan from a bank they will have the power to sell your property at auction if they follow the correct procedure.
Because you have a loan over your property that still has a balance due, does not automatically mean the bank can sell your property. It will depend on what security was taken over when you obtained the loan and if a valid mortgage exists. What sort of notice has been provided and if the bank have complied with the correct process.
You don't want to think that just because I owe money on my home loan the bank will kick me out. However if you ignore a bank sale notice you could be denying yourself the opportunity to do something about it within the time permitted.
Discuss with a Loan Settlement Specialist whether there are any reasons why the bank may not be able to sell your property and if it is worth settling your loan.
Which Laws Apply to a Business Loan Property Auction?
It could consist of SARFAESI Act 2002 and The Security Interest (Enforcement) Rules 2002. There might be other acts used for recovering from the borrower or contractual provisions based on who is the lender.
What Does the SARFAESI Act Mean for Commercial Property Owners?
As per the Section 13(2) of the act a notice can be issued by an eligible secured creditor demanding the amount mentioned in it to be cleared within 60 days provided all conditions are fulfilled as per the act.
In case the borrower fails to comply the secured creditor can initiate steps under Section 13(4). Where permissible he can seize the properties and take step towards selling them as per the law.
The borrower can take help of DRT. Depending upon what step is initiated and the circumstances there are provisions under Section 17 which the borrower can approach.
A negotiation of settlement is different from a stay. There are no automatic stay when you provide OTS or make part payment or ask for time.
Who Should Contact Advocate BK Singh About a Business Loan Default?
Could benefit from consulting an expert if you:
- Own a Business premises which is pledged against a loan.
- Are an MSME / Startup which is in loan recovery due to reduced income.
- Have received Demand Notice / Possession / Auction Notice from your bank.
- Are a Guarantor / Property owner exposed through Loans / Security Documents.
- Want to explore OTS (One time Settlement) as you are unable to pay EMIs.
Loan Settlement Lawyer can advise you on which issues are important to be dealt with and what are some options you can discuss with your Bank.
How Can Loan Settlement Lawyer Help Before a Commercial Property Auction?
When you engage an advocate its not just about replying to bank. It tells you where you stand and which document you will need. Also you know what kind of help you require from the law.
Can Advocate BK Singh help you understand your loan and property document?
Once reviewed you would be aware of the pending amount. Security given to them and the responsibility of the borrower. Where do the recovery process stands. What question you would have to put before asking for a settlement or approach to court.
Can a Loan Settlement Lawyer help me with a OTS?
If borrower is not able to pay as per the schedule which is set then you can opt for One Time Settlement. It all depends upon the banks policy. They will evaluate your request and provide approval if applicable.
BK Singh can guide you through the settlement process and make sure you have it in writing. There is no assurance that any particular amount will be approved.
I have received a Auction notice can I talk to you?
If a auction notice has been sent to you its better to consult at the earliest. So we can find out what stage the auction is at and if there is any remedy available. Do not wait for oral assurances.
What Documents Should You Keep Ready for Legal Consultation?
Selecting proper legal help isn't just about replying back to your bank. You will have to figure out where things stand, what documents you may require and how far this may escalate.
Will Advocate BK Singh Be Able To Review My Loan?
By reviewing your loan you can find out what amounts are pending, security involved and borrower liability. What step recovery may be at. There may be further questions which need to be answered before you decide if you want to approach for settlement.
Could I Approach For A OTS Through Loan Settlement Lawyer?
One time settlement could be an option if you are unable to sustain your current EMI plan. Subject to banks policy and how they may approve.
We at Advocate BK Singh can advise you of how the settlement works. And why it is important to get things in writing. We can not promise you any settlement figures or approvals.
My loan has already been auctioned. Can you still help?
Sure. We can try to review your status. Once you receive a auction letter we can see if there are any remedies left for you. May have to act fast instead of believing on verbal promises.
When Should You Contact a Lawyer About a Property Auction?
It's best not to approach for assistance when the day comes. Try approaching Advocate BK Singh once your installments are significantly behind or when you receive a demand notice or possession notice or the bank has informed you they would like to sell the property.
Depending on the notice you receive there may be a certain amount of time to respond to or if you wish to apply to the DRT for a remedy it will depend on what action the secured creditor has taken. You should make note of this time frame and look at the document you received.
If you have applied for OTS keep a copy of your offer and all correspondence. Just because a bank employee has told you they will hold off recovery that does not mean they will.
Why Hire Loan Settlement Lawyer for Commercial Property Auction Concerns?
If your commercial property is in jeopardy you will want counsel that knows your loan documents and knows where your case stands in the recovery process.
Loan Settlement Lawyer provides you with a resource when needing information regarding your business loan defaulting and how to proceed with a settlement or any questions regarding recovery of your loan. We can help you find what you need to know about your situation and what you can do.
We want to inform you so you can decide if you would like to pursue a settlement, or what steps you should take to prevent recovery or receive the proper injunction.
Visit Loan Settlement Lawyer to learn more about our services.
Frequently Asked Questions
1. Bank can auction commercial property for business loan default?
Yes Bank can auction the commercial property which they have created mortgage against. You need to see your loan papers and recovery notice to verify.
2. Will bank auction my shop / Factory?
Yes property like shop /factory will get auctioned if its duly secured against loan and bank has followed the due procedure.
3. Can I stop auction of my commercial property?
Yes there could be ways to avoid auction but it purely depends on the situation and stage of recovery. There is no sure shot remedy for these kinds of problems.
4. Can I ask bank for OTS after i receive auction notice?
Yes you can always ask bank for One Time Settlement (OTS). But bank is not obliged to accept your request. Just because you asked for OTS will not stop your auction.
5. What is SARFAESI ACT for auction of property?
SARFAESI ACT 2002 allows certain category of secured creditor to exercise their rights on property pledged against loan following certain conditions and procedure.
6. Can Bank directly auction my property?
No bank will have to fulfill all the legal requirement before putting your property up for auction. If you think any of these process has been violated by bank then you should consult a lawyer at earliest.
7. Can bank auction my property which i use for my business?
If you have taken loan for your business by securing your property then your property will be at risk if you don't repay your business loan. It will depend on your documents if you had secured loan properly or any such terms are mentioned which can make you liable.
8. Can I speak to Advocate BK Singh after auction notice is issued?
Yes you should contact Advocate BK Singh as soon as you get demand notice/ possession notice or auction notice. Because if you have any intention of not paying your business loan then you should speak to us.
9. Will Loan Settlement Advocate help me in settling my business loan?
Loan Settlement Advocate will surely help you. He will go through your documents and let you know about various options. It's their decision if they will accept your offer or not.
10. Will they go ahead with auction if i have asked bank for loan settlement?
If you have not heard from bank then yes they will proceed with the auction/recovery. They will not stop unless you get an order from appropriate authority or court granting you stay against the auction.
Final Thoughts
Foreclosure on a commercial property loan will only compound the issue. Believing that it will just go to auction by thinking about it or filing an OTS will solve everything. You could be making a very wrong decision.
Getting advice in the beginning will let you know where you stand with your Lender and have more options. Contact Loan Settlement Lawyer about your Shop, Office, Factory or Warehouse today to learn more from Advocate BK Singh.
The more you know about where you stand the better situation you may be in.
