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Mezzanine Foreclosure in Real Estate Finance: UCC Article 9, Mortgage and Intercreditor Constraints, Threshold Issues

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Thursday, October 5, 2023

Recorded event now available

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This CLE course will examine the mezzanine foreclosure process, including notice, publication, and the commercial reasonableness standard under UCC Article 9. The panel will discuss threshold issues such as property due diligence, certificated interests and UCC policies, and intercreditor agreement and mortgage loan provisions which may impact the mezzanine lender's rights and remedies.


Mezzanine loans have become the preferred vehicle for subordinate financing in real estate transactions. The repayment obligation is typically secured by a perfected UCC security interest in the mortgage borrower's equity interests. Counsel should have a thorough understanding of how the foreclosure remedy is exercised under Article 9 and the mezzanine foreclosure ramifications for the mortgage borrower, mortgage lender, and other parties to the transaction.

Before commencing foreclosure, the mezzanine lender must review all relevant transaction documents, including UCC insurance policies. If the debtor "opted into" Article 8, the lender must locate the certificate. Counsel must understand the mortgage lender's rights and the rights of any senior mezzanine lenders, ground lessors, or other parties with interest in the underlying property. An intercreditor agreement will likely provide the most significant input into the timing and nature of remedies vis a vis other lenders.

Article 9 provides that a public sale must be conducted in a "commercially reasonable" manner, with advance notice to all relevant parties under Sections 9-611 and 9-612. The public must have a "meaningful opportunity" for competitive bidding, requiring some form of advertisement or public notice preceding the sale. The location and manner of the sale should be appropriate to allow for public access to the disposition. Also, counsel should review any recent case law construing what constitutes "commercially reasonable" to ensure compliance with any local standards at the time of the sale.

The mortgage may limit the transfer of ownership interests in the mortgage borrower to a "qualified transferee," generally defined as either the mezzanine lender itself or an institutional investor meeting specific requirements. This significantly restricts the potential universe of purchasers at a foreclosure sale, and the process of "qualifying" the winning bidder may inject uncertainty surrounding the ability of a buyer to close.

Listen as our authoritative panel analyzes these and other issues associated with mezzanine foreclosure under the UCC.



  1. Structure of a mezzanine loan: UCC security interest in the borrower
  2. Steps to take pre-foreclosure
  3. Due diligence: understanding terms of underlying mortgage debt, intercreditor, Article 8 opt-in
  4. Collateral besides equity interests
  5. UCC Foreclosure under Article 9: commercial reasonableness standard
  6. Strict foreclosure
  7. Transfer restrictions: "qualified transferee"


The panel will review these and other critical issues:

  • What level of property due diligence and title review should the mezzanine lender conduct before foreclosure?
  • What provisions in the mortgage documents and the intercreditor agreement should the mezzanine lender consider before foreclosure?
  • How is the commercial reasonableness standard articulated in Article 9, and what does it say about conducting a public sale?
  • What additional steps must the mezzanine lender take if the borrower has opted into Article 8?


Diamond, Meryl
Meryl P. Diamond

Alston & Bird

Ms. Diamond focuses her practice on commercial real estate finance. She represents national commercial banks,...  |  Read More

Zimmerman, Gary
Gary Zimmerman

SVP & Chief Underwriting Counsel
Fidelity National Title Group, UCCPlus

Mr. Zimmerman supervises and coordinates the underwriting, policy and production personnel and functions for the...  |  Read More

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