Machine shop foreclosed machinery goes with the shop?
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  1. #1
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    Default Machine shop foreclosed machinery goes with the shop?

    A local shop got foreclosed on and the owner was evicted. Machinery that is wired into the building stays with the building. Shop owner looses everything and now the new owner is selling the contents. Has anyone ever heard of this sort of thing before?

    Charles

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    If you supply maybe 5 more paragraphs of information some of us could have an answer. Above I am reading "Shit happened".

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    Yes, and did it to a tenant who chose not to show up in small claims court for back rent.
    Not showing up for this court date is a total resignation of everything in the building which does seem dumb but one never knows other circumstances.
    So often way legal and ordered by the court........ what is the question here?
    You say "foreclosed". This usually means a bank loan. Here the bank controls and can sell the assets off at 5 cents or less on the dollar to anyone who then can sell or keep.
    Bob.

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    Dude should have paid his rent.

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    Its also likely the machines are on some kind of finance/lease...as was the building/or the deed given as a mortgage /guarantee.......finance companies seldom get the legals wrong,as foreclosing is their stock in trade.......now heres an edit for you..........read the fine print on any finance /loan agreement.......any and all assets are pledged in satisfaction of the debt.Everything....here we have some bankruptcy protection,whereby a cheap car,tools ,and domestic items cant be seized.

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    A lot of times a commercial loan on a property will also have a UCC filing on the fixtures/equipment. I think this is less common on original purchase loans, but very common if you borrow money against your property later.

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    Ok more information, the owner defaulted on the payment of his loan for the building, equipment was paid for. He also owed a lot of back taxes to the city. His property was sold on the courthouse steps to the highest bidder. They gave him 30 days to clear his stuff. He didnt! I still dont know why, I guess he thought he could fight it. 30 days later the sheriff showed up and evicted him and a clean up crew came in and threw everything they could lift out into the curb. However the new owners said that anything permanently wired or attached to the building stays and was now their property.

    It kind of makes sense if you get thrown out of your house you dont take the water heater or furnace or other appliances that are wired into the house. But I didnt think this would work for industrial buildings. I just wondered if anyone had heard of this happening before.

    New owner wants the equipment gone and wants it gone quick. Asked me if I wanted to buy any but I dont know if he really has authority to sell it.

    Charles

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    I would think if he defaulted on mortgage payments,then the bank would own all his assests anyway under the agreement,and furthermore the county would have seized everything else under their court order............its also likely no one outside of this forum thought the machinery had any value,and scrapping was not economical........dunno about there ,but here you buy a deal like that on the court steps/bailiffs auction,you buy subject to any existing mortgage ,tax obligations ,orders etc,unlees the bank and county agree beforehand to settle claims and split the take by selling with clear title and the meter started again on county charges.

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    Quote Originally Posted by Rob F. View Post
    Dude should have paid his rent.
    Not much to do with rent - is there even a Tenant here? The owner should have paid his mortgage. Foreclosure is the mortgagee asserting there rights against the mortgagor and it can wipe out a lease (if theres a tenant) . It gets complicated and varies by jurisdiction so the guy should contact a lawyer specializing in real estate. With big deals, the lease will often obligate the landlord to obtain stand still agreements with the mortgagee to prevent this sort of thing. As for pocession of equipment because it was electrically connected? hmmmm....i'd be talking to that real estate lawyer.

    I've gone through the foreclosure process, and even on commercial buildings its onerous. Usually they go power of sale which is much quicker....but it all depends on local laws (province/state level)

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    Sorry, new info after I posted, Change rent to mortgage payment:
    Dude should have made his mortgage payments,
    is that better?
    Probably could get all equipment for the time of removing from building, if it can be done before they find a scrappy to do it.

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    Kind of a funny little tidbit - in China, the equipment is registered to that business license at that address. If you decide to move it out, you can't. Not without the agreement of the local government, anyhow. That means everything paid up in full, and even then they can make it impossible if they want to.

    So all these places that say "When the costs get too high we'll just move to the new low-cost location"... they are welcome to. Without any of their stuff

    What was it Richard Pryor said about the wife leaving ? If she do, she gonna be walkin', not driving that Mercedes (bang ! bang bang ! Then the police come and I went inside. 'Cuz the po-lice they don't shoot cahs. They shoot nig-gahs)

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    I can't see the machinery being a 'building improvement' that stays with the building. Not like an electrical panel, boiler, etc., which are building improvements.

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    Sounds to me like they gave the guy 30 days to remove his stuff. Whatever remains is forfeit.

    Since they did that, I would be very surprised if it's not right there in the contract's foreclosure clauses. Also worth noting that commercial mortgages don't come with any of the protections that residential ones do.

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    If it was sold on courthouse steps for back taxes, the county sold everything of value to get their tax money back. Terms of sale on steps probably was worded that anything hard wired included with building sale.

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    Quote Originally Posted by DanielG View Post
    A lot of times a commercial loan on a property will also have a UCC filing on the fixtures/equipment. I think this is less common on original purchase loans, but very common if you borrow money against your property later.
    When making loans on businesses, it's a general rule that the lender will do a UCC filing with the local Secretary of State that perfects a lien on the machinery and other items used for collateral on the loan. The filing will include a general description of the equipment even down to the serial numbers.

    If the borrower fails to pay in accordance with the loan agreement, the machinery can be taken when the business is foreclosed on.

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    Sounds like the guy went into a downward spiral and didn't know when it was time to fold... now he lost it all. Play stupid games win stupid prizes.

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    Quote Originally Posted by kustomizingkid View Post
    Sounds like the guy went into a downward spiral and didn't know when it was time to fold... now he lost it all. Play stupid games win stupid prizes.
    Yea I cant figure it out, many opportunities to change the outcome but it never happened. I can only assume he talked himself into the mindset that it couldnt happen this way. Anyway why isnt the point of my post, I was just wanting to know if anyone had heard of this sort of thing happening. Several people have expressed interest in the machinery but I am skeptical of the new owners right to sell.

    Who wants to buy a machine and have the sheriff show up 6 months later and say you have to give it back.

    Charles

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    Mortgages often contain language stipulating that anything "attached" to the building becomes part of the building, meaning that it is collateralized under the mortgage. This is commonly known as "leasehold improvement" (rooftop central AC is one example) and is universal. Naturally, any bank will try to tie up everything you own under any circumstances, since it is after all what they do—you cannot blame them any more than you can blame a snake for eating a baby bird. However, all machine lease/purchase agreements contain language prohibiting the buyer from allowing the equipment to be thus collateralized. Note, prohibiting the buyer from allowing.
    That means the buyer must ensure that language is inserted into the mortgage specifically excluding machinery or equipment that may be incidentally attached to the structure through electrical wiring, compressed air lines, and/or bolting to the slab. If you fail to do that, shame on you. The machine leasing company comes after you for the machines and so does the mortgage company.

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    Quote Originally Posted by CBlair View Post
    Yea I cant figure it out, many opportunities to change the outcome but it never happened......
    Charles
    Not so hard to figure out if you have been there.
    You are bleeding red like crazy, can't make the bills. One after another they keep piling up on top of each other.
    You fight to tread but the tide is moving too fast. At some point depression sets in so deeply that you just want any way out of this mess.
    Two options that you now see. Swallow the wrong end of a shotgun or just give it all away.
    At this point you have lost the ability to fight any more, but on the good end, and by God's graces you did not pick option one.

    The sale is legit.
    Bob

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    Quote Originally Posted by Oldwrench View Post
    Mortgages often contain language stipulating that anything "attached" to the building becomes part of the building, meaning that it is collateralized under the mortgage. This is commonly known as "leasehold improvement" (rooftop central AC is one example) and is universal. Naturally, any bank will try to tie up everything you own under any circumstances, since it is after all what they do—you cannot blame them any more than you can blame a snake for eating a baby bird. However, all machine lease/purchase agreements contain language prohibiting the buyer from allowing the equipment to be thus collateralized. Note, prohibiting the buyer from allowing.
    That means the buyer must ensure that language is inserted into the mortgage specifically excluding machinery or equipment that may be incidentally attached to the structure through electrical wiring, compressed air lines, and/or bolting to the slab. If you fail to do that, shame on you. The machine leasing company comes after you for the machines and so does the mortgage company.
    FWIW - This is precisely how I have the leases set up for my tenants.

    -Ron

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