Money & Finance › Commercial real estate lending › When CRE loans go bad: workouts, foreclosure and receivership
Commercial foreclosure: trustee's sales and judicial foreclosure
· Law or rule
Fact, law or dataA rule, statute, definition or measured number.
The lender's legal route to take and sell the property: a nonjudicial trustee's sale, or a court-supervised judicial foreclosure.
See it on the Money & Finance map →How it works
Nonjudicial, California's usual path under a deed of trust: the trustee records a notice of default, waits at least three months, publishes a notice of sale for 20 days, then auctions the property, about four months at the fastest. Judicial, the norm in states such as New York, Florida and Illinois: the lender sues and a court orders a sale, often after one to three years. A receiver often runs the building meanwhile. Proceeds pay the foreclosing lender; junior liens are wiped out.
Why it matters
The route sets timing and leverage. In California a trustee's sale is fast but ends any claim against the borrower for a shortfall; a judicial sale is slow but can preserve one.
Facts, rules and data
State statutes (California Civil Code 2924 and following for trustee's sales), recorded notices of default and sale, court dockets, and CMBS servicer reports on foreclosure timelines.
Debates and risks
How much long judicial timelines push lenders toward workouts, and whether receivers preserve or drain a building's value, is debated.
Inside this (2)
Connections (5)
▸California's one-action and anti-deficiency rules bar a deficiency after a nonjudicial Commercial foreclosure: trustee's sales and judicial foreclosureFact, law or data
The connection
A California lender chooses: a nonjudicial trustee's sale, about four months at the fastest, which under Section 580d ends its claim against the borrower; or judicial foreclosure, a year or more with borrower redemption rights, which can yield a deficiency judgment. Most lenders choose the trustee's sale.
When and why
California commercial and residential foreclosures; Section 580d dates from 1940.
How we know
California Code of Civil Procedure 580d and 726, and county foreclosure records in which trustee's sales dominate.
Debates and risks
How many lenders now go judicial against well-off office borrowers, trading speed for a deficiency claim, is not tracked publicly.
▸Jamison Properties' CMBS office defaults in Los Angeles (2024–26) left 811 Wilshire facing Commercial foreclosure: trustee's sales and judicial foreclosureFact, law or data
The connection
811 Wilshire, a 21-story downtown tower, missed its November 2024 maturity on about $35 million of debt with occupancy near 36%. Its appraisal fell from $68 million at the 2014 loan to $40.5 million. Jamison listed it with CBRE in 2025, but the sale fell through and the servicer moved toward foreclosure.
When and why
Downtown Los Angeles, 2024–25; special servicer LNR Partners; facing foreclosure by September 2025.
How we know
Morningstar Credit servicer commentary and reports by CoStar, Bisnow and The Real Deal.
Debates and risks
Whether the tower goes to a third-party buyer at a trustee's sale, to the lender, or is rescued by a late deal had not been reported.
▸Loan modifications and forbearance agreements are the main alternative to Commercial foreclosure: trustee's sales and judicial foreclosureFact, law or data
The connection
Foreclosure is slow and costly, and leaves the lender owning a building it must run and sell, often at a discount. A modification, such as an extension with a paydown, can recover more if the building stabilizes. Lenders compare the expected recovery from a modified loan with the net proceeds of foreclosure.
When and why
In US bank and CMBS workouts; CMBS special servicers must choose the option with the higher net present value for bondholders.
How we know
CMBS pooling and servicing agreements, the 2023 interagency workout statement, and servicer reports on resolutions.
Debates and risks
Whether modifications cut final losses or mostly delay foreclosures is debated; studies of earlier cycles found many modified loans defaulted again.
▸Receivership: a court-appointed receiver runs the property often comes before Commercial foreclosure: trustee's sales and judicial foreclosureFact, law or data
The connection
A lender files suit and asks for a receiver right away, so a neutral party controls rent and upkeep during the months a foreclosure takes. The receiver stabilizes leasing and finances; then the property is sold at a trustee's sale, sold by the receiver, or handed over by deed.
When and why
Common in California commercial defaults, especially troubled office and hotel properties since 2023.
How we know
Court dockets show receiver appointments alongside recorded notices of default on the same properties.
Debates and risks
Whether a receiver's cost, paid from rents, is worth it compared with a quick trustee's sale depends on the building.
▸Deed in lieu of foreclosure: handing back the keys is a negotiated shortcut around Commercial foreclosure: trustee's sales and judicial foreclosureFact, law or data
The connection
Instead of a trustee's sale, borrower and lender agree that the borrower will deed over the property. The lender saves months and gets a cooperative handover; the borrower avoids a public foreclosure and often gets releases. Because no sale wipes out junior liens, lenders with messy title sometimes foreclose anyway.
When and why
US commercial workouts, especially when the owner has little equity left and wants out.
How we know
Recorded grant deeds, deed-in-lieu agreements and title policies; servicer reports note completed deeds in lieu.
Debates and risks
How often deeds in lieu replace foreclosure is not well counted, since many are negotiated privately.