Richard Rothfelder on Bank Foreclosure and Out of Home Leases

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A billboard insider reader had this comment on Billboard Insider’s Easements provide more protection than leases against tax foreclosure:  

Great article on tax foreclosures.  What about bank foreclosures? Have you had any experience with this or have you spoken with other operators about this? How can we protect our leases when it comes to these bank foreclosures?

Richard Rothfelder, Partner, Rothfelder Falick

What happens to an out of home lease when a bank forecloses on a property depends on when everything was recorded.

  • If you executed and recorded your lease before a bank mortgage was executed and recorded then your out of home lease will remain in effect.
  • If you executed and recorded your lease after a bank mortgage was executed and recorded then your out of home lease is a junior interest which can be terminated by the lender after foreclosure.
  • If you haven’t recorded your lease then it can probably be terminated by the lender after foreclosure.

Just because the lender can terminate your lease doesn’t mean that it will terminate your lease.  In many cases your lease provides valuable income and a lender may not want to give up the income by terminating the lease.  But it the lender wants to renegotiate the lease or develop the property without the billboard or sell the property for development your lease may be at risk.

What’s the fix for this?

  • Obtain a subordination agreement from the bank or lienholder relating to your lease so that it agrees that your lease will come first in priority if it forecloses.
  • Monitor the financial condition of your landowners to be alerted to lending problems.  Maybe you’ll be able to buy the property for a great price, carve out an easement and then you can sell the property.

Want to read more.  See:

Rothfelder on Billboard Leases and Disputes with Landlords

Rothfelder on taxes, foreclosures and billboard easements.

 

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One Comment

  1. Richard Hamlin
    June 2, 2025 at 5:57 pm

    In California, and most states, if you have an imprint on the sign, it will probably be sufficient to put a lender on “inquiry notice.” That is, they will have a duty to contact you to learn the basis of your presence on the land. With that knowledge, the loan would be subordinate to the lease.

    If you have your imprint on the sign, courts will say the lender (and any purchaser) will be charged with the knowledge they would have acquired by inquiry to occupants on the land. Even if they don’t inquire, their loan will be subordinate to the lease. We have successfully won lawsuits challenging billboard leases by purchasers at foreclosure sales on that basis.

    (My partner, Marnie Cody, and I did an OAAA webinar on the advantages and disadvantages of recording billboard leases.)