USA – SOUTH CAROLINA Law and Practice Contributed by: Matt Norton and Christian Kolic, K&L Gates
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
a notice in a prescribed form prior to the transac - tion and the execution of a waiver in a prescribed form as part of the transaction. Private Enforcement of Mortgages South Carolina does not recognise private enforcement of mortgages, such as by way of a power of sale. Further, a lender is not entitled to take possession of the mortgaged property after default – a lender’s remedy is limited to judicial foreclosure. In a judicial foreclosure, a receiver may be appointed by the court to take possession of the property and collect rents for the benefit of the lender, but only if the appropri - ate language is contained in the mortgage loan documents. Lenders are advised to consult South Carolina counsel to ensure that the financing documents include the necessary receivership provisions. Assignment In addition to a mortgage, borrowers are gener - ally required to execute an assignment of the leases, rents and profits of the property. South Carolina counsel should be consulted to ensure the adequacy of any such intended assign - ment. To the extent there is significant non-real- estate collateral located on the property (such as machinery and equipment), a borrower may grant a personal property security interest in that non-real-estate collateral. Finally, security can also be taken at the equity level of the real estate owning entity. This is done by way of a pledge of the equity interests in the real estate owning entity by the owners of those interests.
Acquisition of commercial real estate is gener - ally financed by mortgage lenders, who may be either institutional lenders or private equity funds, by way of a joint venture investment or some combination of the foregoing. In addition, mezzanine financing is becoming more com - mon and may be used in conjunction with the more traditional mortgage loan. Many loans of income-producing property are structured to the rating agency requirements for inclusion in a commercial mortgage-backed loan package. Larger real estate portfolio acquisitions are frequently financed by private equity or multi- lender loans. 3.2 Typical Security Created by Commercial Investors Most real estate financing is secured by a mort - gage, which will grant to the lender a lien on the subject real property. Upon default by the borrower, the lender may institute judicial fore - closure proceedings and cause the public sale by the court of the mortgaged property. The pro - ceeds of that sale will be applied to reduce the borrower’s indebtedness secured by mortgage. Deficiency Whether the borrower is potentially liable for any deficiency remaining after the sale is determined by the terms of the financing documents. Moreo - ver, South Carolina has an anti-deficiency stat - ute that allows a borrower to use an appraisal process to potentially reduce or eliminate any deficiency judgment. A borrower’s rights under this anti-deficiency statute may be waived, but the waiver must meet a number of statutory and procedural requirements, including the giving of
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