USA – LOUISIANA Law and Practice Contributed by: Jeffrey P. Good, Susan M. Tyler, B. Trevor Wilson and Parker Hufft, Jones Walker LLP
proceeding, the sheriff of the parish will set a sale date for the property. The sheriff must advertise the sale of the property at least twice and, typically, an appraisal of the property is submitted by or on behalf of the borrower and the lender. The lender must be careful to give notice of the judicial sale to any parties hold - ing an interest in the property that may be affected by the sale. At the sale, the property will not be sold if the highest bid does not exceed two-thirds of the appraised val - ue, and the sheriff must re-advertise for a second sale, at which time the mortgaged property will be sold for cash at any price. The judicial sale of the property is subject to superior liens, encumbrances and leases; all inferior liens, encumbrances and leases are can - celled. In some cases, a lender may be entitled to pur - sue a deficiency judgment against the borrower if the sale proceeds do not satisfy the judgment. Louisiana does not provide redemption rights to the borrower once the property has been sold at a foreclosure sale. 3.7 Subordinating Existing Debt to Newly Created Debt Typically, the filing of the mortgage or the financing statement in the appropriate registry will establish the priority of that security interest against other compet - ing security interests. In some cases, a lender may elect to voluntarily subordinate its mortgage or secu - rity interest to a newly created mortgage or security instrument through a subordination agreement. There are some circumstances in which new debt or liens may prime existing debt, including purchase mon - ey security interests, and priority treatment may be established for certain classes of lien claimants under the Louisiana Private Works Act. 3.8 Lenders’ Liability Under Environmental Laws Federal law exempts a lender who acquires title to property pursuant to a foreclosure sale or by dation en paiement (deed in lieu of foreclosure) from liability for clean-up costs due to contamination of the property, provided that the lender does not – before or after acquisition of the title – participate in the management of the property such that the lender exercises deci - sion-making control over environmental compliance, or comparable to a manager of the property. Louisiana
law provides that it is the intent of the legislature that secured lenders will have no greater exposure to envi - ronmental liability and financial responsibility under state law than they would under federal law. To minimise environmental liability risk, lenders typi - cally require environmental assessments before loan origination and incorporate specific covenants in loan documents regarding environmental matters. 3.9 Effects of a Borrower Becoming Insolvent The filing of a petition by or against a borrower in fed - eral bankruptcy court effects an automatic stay (hold) of the foreclosure proceedings and makes enforce - ment of the mortgage and the sale of the property more difficult. It is not unusual for a borrower to file a bankruptcy on the date of the sheriff’s sale in a fore - closure, which delays the sale through the imposition of the automatic stay. If the sale has already occurred, the borrower is no longer the owner of the property, unless the purchaser at the foreclosure sale fails to pay the purchase price on time, in which case the borrower has no right of redemption. Security interests created within the 90-day period (or one year for insiders) prior to a bankruptcy filing may be subject to avoidance as preferential transfers if they secure previously unsecured debt. Security interests may also be challenged as fraudulent transfers if the debtor received less than reasonably equivalent value and was insolvent at the time of the transfer. 3.10 Taxes on Loans There are no existing, pending or proposed rules, regulations or requirements that lenders or borrowers pay any recording or similar taxes in connection with mezzanine loans related to real estate.
4. Planning and Zoning 4.1 Planning and Zoning Framework
Zoning ordinances in Louisiana may be enacted at both the municipal and parish levels, and can restrict owners’ enjoyment of real estate, typically by provid - ing limitations on permissive uses and establishing building site plan requirements. State law specifically
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