The Importance of Maintaining Good Rent Rolls for Commercial Building Loans
A rent roll is a commercial property owner’s rental record that indicates who is current with their rent and who is not. Maintaining good rent rolls for commercial building loans is very important for the borrower because this information will be used by lenders to determine the borrower’s eligibility for loan assistance programs like loan modification, short sale, or deed in lieu.
When a commercial property owner begins to have trouble making their minimum monthly payments to their lender they can face foreclosure of the loan and the loss of the property that was used as collateral against the loan. In most cases, the collateral used to obtain a commercial building loan will be the commercial building itself.
When the commercial building loan borrower comes to a point that they decide to request assistance from their lender in the form of a loan modification, for example, the lender will request certain documents and financial records in addition to an application for assistance. Usually, an application packet for assistance will include a lender specific form, copies of income and loss statements, bank statements, and a hardship letter. This requirement may change slightly from lender to lender, but the basic requirements will remain the same. Lenders can advise their borrowers on exactly what information they will need to gather before the application process even begins. It would be a good idea for the commercial property owner to know what information will be needed before financial trouble sets in so that one less thing can be worried about when it does set in. In the case of the application for a loan modification, the rent rolls will be used as part of the income and loss statements as well as evidence to prove any claims in the hardship letter.
The hardship letter is perhaps the most important part of the entire loan modification application because it explains in the borrower’s own words the reason for the assistance. For commercial property owners with multiple tenants who are behind on their rent, the rent rolls should be more than enough evidence to prove that a hardship is legitimate. The hardship will still have to be explained in the hardship letter, as well as a plan for how the borrower expects to climb out of their debt, but at least the lender will be able to see that the borrower is in actual need of assistance.
The rent rolls for commercial building loans will also help the property owner decide on a course of legal action if the non-payment of lease payments by tenants is so much that they are now causing the owner to face foreclosure. A commercial property owner concerned that his or her tenants will be responsible for the foreclosure of the property should hire an experienced foreclosure attorney as quickly as possible, as a foreclosure attorney will be able to represent the borrower on both fronts, against the borrower and against the delinquent tenants. The attorney will also be able to review the rent rolls for accuracy and to determine whether or not any options exist for the property owner out of court. In many cases, and with a good attorney involved, settling a dispute out of court can be beneficial for all parties involved.