USA - SOUTH CAROLINA Law and Practice Contributed by: Matt Norton and Christian Kolic, K&L Gates
with the result that the debt is effectively subor - dinated to claims of other creditors. 3.8 Lenders’ Liability Under Environmental Laws As a general rule, a lender does not become lia - ble under environmental laws by virtue of hold- ing a mortgage or by virtue of foreclosing the mortgage and taking title to the property for the purpose of reselling it to an ultimate purchaser. A lender may nevertheless become liable if the lender actively participates in the management of the property. “Active participation” by a lender means that the lender exercised decision-mak - ing control over environmental compliance with respect to the property or exercised general management control such as that typically exer - cised by a manager of the facility or property. A lender may, however, inspect the property, require a borrower to respond to contamina - tion issues, provide the borrower with financial advice, or amend or restructure the mortgage or loan terms – these activities are not deemed to constitute active participation. 3.9 Effects of a Borrower Becoming Insolvent A filing of bankruptcy proceedings by or against a borrower will result in an automatic stay or injunction against all creditors. This automatic stay will prohibit any acts to enforce the mort - gage or collect the mortgage indebtedness. In order to proceed with foreclosure or collection activities, a lender must have this automatic stay modified by the bankruptcy court. A mortgage lender is deemed to be a secured creditor to the extent of the value of its collateral. As part of the bankruptcy process, the repay - ment terms of the mortgage indebtedness may be extended for a longer period and the interest
rate may be modified, but in theory, the amend - ed repayment terms must grant the lender on a present value basis the equivalent value of its mortgage interest. Mortgages may be set aside in bankruptcy if the mortgage was granted within the period immedi - ately preceding the bankruptcy filing as security for a pre-existing unsecured debt, if the mortgage lender did not provide reasonably equivalent val - ue to the borrower in exchange for the granting of the mortgage, or if there is a significant delay in the recording of the mortgage. A mortgage may also be set aside in bankruptcy if it is not timely and properly filed and indexed in the real property records so as to cause the mortgage to have priority over competing lien creditors. The most important actions a mortgagor lender may take to protect itself from bankruptcy risks is to ensure that the mortgage is recorded in a timely manner and properly indexed in the appropriate recording office. 3.10 Taxes on Loans There is no existing or pending legislation in South Carolina that proposes to impose a mort - gage recording tax, or tax on a pledge of share, or membership interests in the borrower in con - nection with a mezzanine loan. 4. Planning and Zoning 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning Most jurisdictions have a local planning com - mission, which undertakes a continued plan - ning programme for the physical and economic growth of the jurisdiction.
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