Here’s how commercial foreclosures work in Georgia:

3. Determine what is being sold. Obviously, the lender will conduct a foreclosure auction of the collateral property. However, it is important for the lender to know the current status of the property, including any unexpected liens or transfers, before conducting a foreclosure auction. Depending on the circumstances, it may be wise to resolve any title issues prior to a foreclosure auction to avoid problems later. In addition, depending on the type of property, it may be wise to conduct an environmental impact assessment. The environmental impact assessment can tell the lender whether to include the property in the inventory if no third-party buyer is found at the foreclosure auction, or whether it would be preferable to form a special purpose vehicle to manage the property.

During the pre-sale phase, the lender should also conduct an appraisal of the property, particularly if a defect is to be identified. In a situation where the lender is seeking a deficiency judgment, it may wish to appoint an appraiser who is qualified to serve as an expert witness in a subsequent foreclosure confirmation proceeding (see below). This appraiser may be retained directly by an attorney for legal reasons, rather than initiated by a lender as is more common.

4. Real estate advertisement and advertising for sale. Georgia has special requirements for the notice and communication of a foreclosure sale, both in terms of content and the manner in which it is communicated. See OCGA § 44-14-162, ff. For example, notice of foreclosure sale must be sent to the “debtor” by certified or certified mail at least 30 days before the sale. The “debtor” does not necessarily have to be the borrower who signed the loan documents, as that person or persons may also be “the current owner of the property encumbered with the debt” (OCGA § 44-14-162.1). This underscores why a title update is so important, as it is not uncommon for debtors to attempt to create confusion in the chain of title in order to delay a sale or thwart the rights of other creditors. Failure to send the required notices to the correct “debtor”(s) could result in an injunction against the sale or lead to a possible wrongful foreclosure claim later. In addition, the notice must also include “the name, address, and telephone number of the person or entity having full authority to negotiate, amend, and modify all terms and conditions of the mortgage with the borrower” (OCGA § 44-14-162.2(a). Although the lender is not required to modify the loan documents, failure to comply with this specific requirement may also result in litigation later.

The foreclosure notice itself must appear in the appropriate county legal organ (newspaper) once a week for four weeks prior to the scheduled foreclosure auction. OCGA § 9-13-141. In Georgia, foreclosure auctions may only take place on the first Tuesday of the month. See OCGA § 9-13-161(a). These timing requirements require that the preparatory work necessary for an effective foreclosure auction must begin well in advance of the deadline for mailing notices and advertising the auction. Failure to complete the preparatory work in a timely manner to mail notices and file advertisements before the newspaper closes will result in a delay of at least one month before the lender can use the next foreclosure auction window.